Editing Economic bubble (section)

====Herding====
Another related explanation used in [[behavioral finance]] lies in [[herd behavior]], the fact that investors tend to buy or sell in the direction of the market trend.<ref>{{cite journal |last1=Harmon |first1=D |last2=Lagi |first2=M |last3=de Aguiar |first3=MAM |last4=Chinellato |first4=DD |last5=Braha |first5=D |last6=Epstein |first6=IR |display-authors=etal |year=2015 |title=Anticipating Economic Market Crises Using Measures of Collective Panic |journal=PLOS ONE |volume=10 |issue=7 |page=e0131871 |doi=10.1371/journal.pone.0131871 |pmid=26185988 |pmc=4506134 |bibcode=2015PLoSO..1031871H |doi-access=free}}</ref><ref>{{Cite magazine |last=Keim |first=Brandon |title=Possible Early Warning Sign for Market Crashes |language=en-US |magazine=Wired |url=https://www.wired.com/2011/03/market-panic-signs/ |access-date=2023-08-11 |issn=1059-1028}}</ref> This is sometimes helped by [[technical analysis]] that tries precisely to detect those trends and follow them, which creates a [[self-fulfilling prophecy]].

Investment managers, such as stock [[mutual fund]] managers, are compensated and retained in part due to their performance relative to peers. Taking a conservative or contrarian position as a bubble builds results in performance unfavorable to peers.  This may cause customers to go elsewhere and can affect the investment manager's own employment or compensation. The typical short-term focus of U.S. equity markets exacerbates the risk for investment managers that do not participate during the building phase of a bubble, particularly one that builds over a longer period of time. In attempting to maximize returns for clients and maintain their employment, they may rationally participate in a bubble they believe to be forming, as the likely shorter-term benefits of doing so outweigh the likely longer-term risks.<ref>{{cite web|url=https://www.theatlantic.com/doc/200812/blodget-wall-street|title=Why Wall Street Always Blows It|first=Henry|last=Blodget|website=[[The Atlantic]]|access-date=31 August 2017|date=December 2008}}</ref>