Behavioral finance FAQ / Glossary (Imitation / mimicry)
This is a separate page of the I-L and M sections of the Glossary
Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed, i: incidental
Imitation / mimicry
02/4i, 03/10i + see trend following, learning,
cognitive, herding, cascade, conformity,
peer pressure, + bfdef2
As long as my neighbor did it, why not me?
Why re-invent the wheel?
Well, maybe to find a rounder one.
Mimicry / imitation (*) is a widespread human tendency to reproduce the behavior of
other people (be they gurus, group or crowd members, peers or close relatives or neighbors)
by conforming to:
(*) If we want to be purist in those definitions, we might say that imitation is done in
some circumstances while mimicry is the habit to imitate (a person or group or a
type of person or group) in many situations.
Since birth, social learning (see 'learning') is done by imitating
the people around, in practice by observing them and replicating their behavior.
This process combines two aspects:
Cognitive: learning by
* Observing and perceiving what other people (and among them those seen as
"role models") say and do.
* Then testing this perception by behaving accordingly.
This is is a practical shortcut, even if it does not suffice, to accumulate knowledge and
Affective, linked to the feelings of proximity and community experimented
towards other people (see affect heuristic).
Any human being has a vital need for social ties and togetherness, but it might be
Also, adopting other people beliefs, whatever their worth, might be felt as an antidote
to the mental pain caused by uncertainty (see that word).
Last but not least, some people learn in the contrary by opposing other people.
But such a "counter-dependence" can be a kind of dependence, not to confuse
with real autonomy.
Aping can help, but it is not an all-road and all-weather substitute
The imitation of others has at the same time advantages and drawbacks:
The advantages are
To simplify knowledge acquisition, as a fast track, nearly instant,
In some circumstances to be a rational adaptation behavior ("do in Rome
like the Romans do").
The drawbacks lie in the neglect to check the relevancy of such mimicry.
For example the imitator might not wonder:
Whether past common knowledge really fits new situations,
Or if those other people act rationally ("as they do it, they must have
Or if there is some agenda and manipulation in the "good example" they
intend to give.
Thus mimicry is sometimes a maladapted instinct, a Pavlovian reflex which serves no
Or worse, imitating others can lead us to:
Neglect other information that contradicts what we learnt.
This is a form of cognitive bias (see selective exposure).
Oversimplify the way we decide our actions.
When the world around us becomes different, we might not check whether
the automatic modes we learnt (common heuristic, habits, routines) are still
well grounded. Thus we fail to update our way of doing.
From mimicry to herding
Trapped in the crowd or adapted to it?
Imitating the imitators
When an imitation is not limited towards one or a few people but when most members
of a group mimic one another, the phenomenon is labeled herd instinct /
herding (see those word), a classical behavioral finance / behavioral economics notion.
People tend to get an impression of safety by doing the same thing as other people.
Aristotle defined human beings as "social animals".
Luckily, it is only partially true, it would be frightening to have only sheep
or wolves around.
Well, he seemed not too good at subtle thinking. He saw the world in a
binary way with everything as either white or black or as either true
Not the guy for "fuzzy logic" (see that word, also used in Behavioral finance).
The stock market case
Jumping together into or out of the market.
In financial markets, imitation / mimicry (see that word) is often at play.
Investors tend to follow price trends, not wondering if they are justified
by economic prospects.
In stock markets it happens rather often that, at the same moment. all the most
active investors want to buy the same stock, or to get rid of it,
This killer wave extends to the whole market if a mass of people try to buy or sell all
assets at the same time.
This can create excesses, including bubbles and crashes (see those words)
(*) To find those messages: reach that Behavioral-Finance group and, once there,
1) click "messages", 2) enter your query in "search archives".
Members of the Behavioral Finance Group, please vote
on the glossary quality at Behavioral-Finance/polls