Wednesday, 31 October 2012
What It Is:
Panic buying refers to the purchase of a stock immediately after a sudden, substantial price increase.
How it works/Example:
Investors watching the market may jump to buy a stock immediately after a major move in the stock's price, hoping to take advantage of the surge in the price.
Why it matters:
Investors may buy stock for a number of reasons. Fear of being left out of the next big thing, however, is not the best reason. Panic buying usually is the result of the herd instinct among some investors. While there may be some gains on the residual increase in the price spike, it is often too little, too late.