Do I need to learn the weighting method for different indices mentioned in the Schweser Notes?
Also can someone please tell the difference between information cascades and herding behavior?
Yes.
An information cascade is an overwhelming amount of information that an average investor cannot process: either there’s too much information, or it’s ambiguous, or it’s incomprehensible, or whatever. When faced with an information cascade, average investors tend to ignore it and follow the lead of informed investors.
Herding behavior has similar results as an information cascade: lots of investors doing the same thing at the same time, but the cause isn’t an overwhelming amount of information; indeed, herding behavior can occur when there is a lack of information: average investors do what everybody else is doing, for no reason.
Thank you sir.
The difference between Information cascade and herding behaviour is correctly explained by S2000 magician.
And YES you need to learn all the methods given in the book.
thank you sir.
My pleasure.
mr. magician -is herding behaviour one of the main reasons for formation of financial bubbles(where assets get highly overpriced)?
I’m sure that it is.