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,
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 should I re-invent the wheel?
Well, maybe to find a rounder one.
Role model, please climb on the stage!
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:
Their look also ? Several economic sectors are based on that !
(*) 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 persons or groups) in many
Since birth, social learning (see 'learning') is done by imitating
the people around, in practice by observing them and replicating their
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 experience.
Affective, linked to the feelings of proximity and community that
is experienced towards other people (see affect heuristic).
Oxytocine, the trust and love hormone, at work in the brain !
Any human being has a vital need for social ties and togetherness, but
it might be sometimes perverted.
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
But such a "counter-dependence" can be a kind of dependence, not
to confuse with real autonomy.
Aping can help sometimes,
but it is not an all-road and all-weather
substitute for thinking.
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
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 a reason")
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 real purpose.
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 change, we might also neglect
to 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 words), a classical behavioral finance
/ behavioral economics notion.
People tend to get an impression of safety by doing the same thing as other
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
eithertrue or false.
Not the guy for "fuzzy logic" (see that word, also used in Behavioral
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,
Of course an exchange happens when the same quantity is sold and
bought, but in such a case only with a huge price change.
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 BF group and, once there,
1) click "messages", 2) enter your query in "search archives".
Members of the BF Group, please
vote on the glossary quality at BF polls