Answer:
The correct answer is that stock market movements are influenced by herd behavior as investors often follow the crowd, which can contribute to market volatility.
Step-by-step explanation:
The relationship between the stock market and herd behavior is an important aspect of financial markets. Herd behavior suggests that investors often follow the crowd rather than making independent decisions based on fundamental analysis. This can lead to exaggerated movements in stock prices as people rush to buy or sell based on what others are doing, potentially disregarding underlying values.
The correct answer to the student's question is: C. Stock market movements are influenced by herd behavior as investors often follow the crowd. While not all fluctuations are due to herd behavior, and individual stocks can be affected, it is recognized that herd behavior can influence broader market movements and contribute to market volatility.