VIX and the lemming effect

  • By John Zachary,
  • Stocks and Commodities Magazine
  • Technical Analysis
  • Technical Analysis
  • Technical Analysis
  • Technical Analysis
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Lemmings, small rodents best known for an instinct to charge off jagged cliffs to their deaths en masse, have immortalized the term “lemming effect.” A lemming effect signifies an event where the collective actions compel the herd to stay within the group, only to meet with tragic results in the end. This is also an effective metaphor for the stock market, where millions of investors will follow the crowd at both ends of the extreme: up or down, bullish or bearish, with tragic results as they overplay their position. While otherwise intelligent, these people can’t seem to help themselves when the trends sputter to an end yet they continue in that direction, and then compound the problem by failing to confront the fact that their ride is over. Read on to learn more...

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