Quant · Core
Herding
Herding is correlated action because others are acting — information cascades, career risk, or indexation, not independent theses that happen to agree.
Definition
Agents overweight others’ actions: career herding (don’t be wrong alone), inferring information from order flow, or mechanical herding (vol-control, CTAs, indexes). Crowding is the position snapshot; herding is the dynamic.
Why it matters
Liquidations rhyme because the exits rhyme. A ‘diversified’ holder base that shares a risk model is one holder.
Case
Vol-control and target-vol overlay selling into a 2015 or 2018 vol spike. Each was following a rule; together they were a herd.
How to read it
Who else is in the trade and what rule forces them out. If the answer is ‘our model,’ assume company.
No query has been run yet. Which is tragically normal for most knowledge systems, but we are trying to evolve past decorative databases.