Which of the following is a feature of 'Herd Behaviour' in financial markets?
A. Imitation never occurs
B. Individuals always act independently on the basis of their own information
C. Individuals imitate the actions of others, potentially leading to cascades and excess volatility
D. Only fundamental information drives prices
Answer: Option C
Solution (By JKSSB Mock Tests)
Herd behaviour occurs when agents follow the actions of others rather than their own private information, which can generate informational cascades, bubbles and crashes.
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