Herd behavior in investment and consumption

Abstract

Herd behavior is one of the common phenomena in economics and is frequently used to predict individual’s follow-up behavior. Herd behavior usually appears in investment and consumption, both investors and consumers are easily to be influenced by the group and change their point of view. Therefore, it is necessary to analyze herd behavior in the forecasting of demand management. This paper mainly focuses on the analysis of consumption behavior and proposes a survey derived from Wenzhou Kean University students to analyze whether herd behavior exist in students’ online purchasing behavior and the factors that contribute to it. Multiple regression model will examine how living expense, online reviews, brand and sales promotion affect the amount of money students spent on online shopping every month. Difference in means test will examine whether there was a significant gender and major difference in online shopping behaviors and whether there was a significant relationship between market information and amount of money spent on online shopping every month. This paper finds that living expenses have a significant effect on the amount of money spent on online shopping every month. Attitude towards online reviews and brand had no significant. Sales promotion has effect on students’ online purchasing behavior to some extent, especially resulting in buying the unneeded products. There is a relationship between market information which is divided into seller’s information and product information, and monthly online shopping expense. A good command of product information can make a difference in the monthly online shopping expense while seller’s information does not affect.