Criticism of “herd behavior” in the corona crisis

Criticism of 'herd behavior' in the corona crisis

The economist marcel fratzscher considers widespread "herd behavior" to be one of the greatest dangers in the current corona crisis.

"That’s my rough worry: this panic, this herd behavior of financial investors," the head of the berlin DIW told the "passauer neue presse" (saturday). "There’s something like that with companies and consumers, too. This is partly very irrational."In the worst case this could trigger a downward spiral.

Fratzscher expressed concern that "things we are seeing in china, namely changes in consumer behavior," would soon be possible in europe and germany as the crisis spreads. "There are already first small signs of this.

At some point, companies and consumers were able to respond to the many uncertainties with changes in behavior and demand. Then a vicious spiral could threaten, in which financial markets sink, companies cut back their investments and consumers curb their demand.

The economist illustrated this with the current development on the stock exchanges: "for weeks there was complete ignorance of the consequences of the corona virus with one record after another," said fratzscher. Just two weeks ago, for example, the german stock index dax reached a record high of 13 percent.795 points achieved, regardless of the progressive spread of the coronavirus. "And all of a sudden an event, in this case italy, causes panic to break out on the markets and they go in the opposite direction."

After several days of losses in a row, the dax had at times crashed more than 5 percent on friday, closing at just 11 890.35 points. With a slide of 12.44 percent since last friday, investors experienced the blackest week in many years.

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