The Differences Between a Random Walk and an Information Cascade

An informational cascade is a process whereby the next step is just as likely to be up as it is down. People who try to value a good or an asset then use a combination of their personal valuation and some kind of outside valuation. Depending on the relative weights that you attach to your personal valuation or the outside valuation, you may end up in a situation where, again, it becomes self-referential. It usually happens in the form of a cascade across time.