"Herd behavior, or the tendency of individuals in a group to 'follow the trend,' has frequently been observed in equity markets. Herd behavior in investors leads to a convergence of action." [Yan, Zhao, Sun (2012)]
"Theoretical models on herd behavior predict that under different assumptions, herding can bring prices away (or towards) fundamentals and reduce (or enhance) market efficiency." [Yan, Zhao, Sun (2019)]
For anyone still shaking their head over the recent eye-popping, one-way trends in the stock market, the academic assessments of "herd behavior" above may provide one of the best summations I've seen.
Or, if you prefer something a little more pop culture oriented, there is Eddie Vedder's view on the subject from the 1996 Pearl Jam hit Do The Evolution... "I'm the man buying stocks on the day of the crash... It's herd behavior, uh huh, it's evolution, baby." (P.S. If you are looking for a little kick-start to your day, this video will definitely do the trick.)
Blame It On The Computers?
To be clear, I have never been involved with a high-speed or high-frequency trading shop. As such, I have to admit that I do not know all the ins and outs of how today's algorithmic trading programs function - or even what triggers them. However, I have done a fair amount of research on the subject and as such, I am pretty confident that algo-induced herd behavior had a hand in both the slow-motion crash that occurred between 12/4 and 12/24 and the ensuing joyride to the upside that began on 12/26.
I know, I know. We can't blame everything on the computers. And yes, there were definitely "issues" that traders and investors had to sort through/deal with in December. Not the least of which was the fear that a policy misstep from ...