"Interestingly, recent research shows that herd behavior is consistent with rational expectations when information is imperfect, though the extent of the herd behavior may well be greater than can be explained by these models. The essential reason for volatility in financial markets, as emphasized by Keynes, is that market players respond to expectations. The value of any asset today depends on what others are expected to be willing to pay for it tomorrow, and that depends in turn (in a never ending chain) on what others are expected to be willing to pay the day after. These expectations are based on information about current conditions. Such information is inherently incomplete and costly to process. This makes it rational for everyone to glean information about the desirability of investing from the opinions and actions of others."