Safety in numbers’ mindset contributes to investment herding.
It is only human to try to evade responsibillity for difficult decision, particularly when our careers might depend on it. The problem when nobody takes responsibility, bad decisions can flourish. (…) The best known example of the problem was the power unwittingly vested in credit rating agencies. Regulations steered fund managers into credits with a certain minimum quality. Banks knew that the amount of capital they had to hold as a buffer depended on the rating the agency gave to the credits they held.