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Herding
Prechter, www.socionomics.com
Figure 1Prechter, www.socionomics.com
—Wayne Parker, Herding: An Interdisciplinary Integrative Review from a
Socionomic Perspective
—Presented to International Conference on Cognitive Economics, Sofia,
Bulgaria, August 5-8, 2005
1
Evolu-
tionary
origin
2
Un-
certa-
inty
3
Homo-
geneous
agents
4
Endoge-
nous
process
5
Con-
scious
6
Ration-
al
7
Equili-
brium
8
Util.-
Max.
Social psych. No Yes Yes Yes/No Yes/No Yes/No ? Yes
Info. Theory Yes/No Yes Yes/No No Yes Yes Yes Yes
Ethological Yes Yes Yes Yes No No ? Yes
Econophysics ? Yes No Yes/No Yes/No Yes Yes Yes
Medical Yes Yes No Yes No No Yes/No Yes
Socionomics Yes Yes Yes Yes No No No No
Contrasting Models of Herding on Eight
Theoretical Dimensions
www.socionomics.org/herding
Figure 2Prechter, www.socionomics.com
Figure 3Prechter, www.socionomics.com
Figure 4Prechter, www.socionomics.com
Figure 5Prechter, www.socionomics.com
Figure 6Prechter, www.socionomics.com
Figure 7
Herding is fractal
Prechter, www.socionomics.com
Figure 8Prechter, www.socionomics.com
Figure 9
Actual Growth of
Investment over 10 years
Year $100,000
1 118200
2 139712
3 165140
4 195195
5 230721
6 272712
7 322346
8 381013
9 450357
10 $532,322
Growth of the most
successful diversified
stock mutual fund:
+18.2%, compounded
annually, is a 432% gain.
$100,000 became $532,000
in ten years (5x).
Prechter, www.socionomics.com
Figure 10Prechter, www.socionomics.com
Figure 11
Fund growth vs.
the actual
experience of
investors:
-11% compounded
annually = 68.8% loss.
$100,000 became
$31,200 in ten years.
Actual
Comparative Returns
over 10 years
Fund
Value
Avg. Investor’s
Account
Year $100,000 $100,000
1 118200 89000
2 139712 79210
3 165140 70496
4 195195 62742
5 230721 55840
6 272712 49698
7 322346 44231
8 381013 39365
9 450357 35035
10 $532,322 $31,18194%
less
17
times
Prechter, www.socionomics.com
Figure 12Prechter, www.socionomics.com
Figure 13
Comparative Returns over 30 yearsFund
Value
Investor’s
Return
Fund
Value
Investor’
s Return
Year
0
$100,000 $100,00
0
Year
1 118200 89000 16 1451709 15496
2 139712 79210 17 1715920 13792
3 165140 70496 18 2028217 12275
4 195195 62742 19 2397353 10924
5 230721 55840 20 $283,3671 $9,723
6 272712 49698 21 3349399 8653
7 322346 44231 22 3958990 7701
8 381013 39365 23 4679527 6854
9 450357 35035 24 5531201 6100
10 $532,322 $31,181 25 6537879 5429
11 629205 27751 26 7727773 4832
12 743720 24699 27 9134228 4300
13 879077 21982 28 10796658 3827
14 1039069 19564 29 12761649 3406
15 1228180 17412 30 $15,084,27
0
$3,031
Projected 30-year
Experience
The fund would be up 150
times in value.
But investors’ $100,000 would
become $3000 for a loss of 97
percent.
$15 million is 5000 times
$3000.
$3000 is 99.98% less than
$15 million.
Prechter, www.socionomics.com
99.8%
less
150
times
Figure 14
How did other investors do?
Prechter, www.socionomics.com
Figure 15Prechter, www.socionomics.com
Figure 16Prechter, www.socionomics.com
