Transmission of Information and Herd Behavior: An Application to Financial Markets
نویسندگان
چکیده
منابع مشابه
Transmission of information and herd Behavior: an application to financial markets.
We propose a model for stochastic formation of opinion clusters, modeled by an evolving network, and herd behavior to account for the observed fat-tail distribution in returns of financial-price data. The only parameter of the model is h, the rate of information dispersion per trade, which is a measure of herding behavior. For h below a critical h(*) the system displays a power-law distribution...
متن کاملHerd Behavior in Efficient Financial Markets
Rational herd behavior and informationally efficient security prices have long been considered to be mutually exclusive but for exceptional cases. In this paper we describe conditions on the underlying information structure that are necessary and sufficient for informational herding. Employing a standard sequential security trading model, we argue that people may be subject to herding if and on...
متن کاملRisk Aversion and Herd Behavior in Financial Markets∗
We show that differences in investors risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents markets from being efficient in the sense that Þnancial market prices do not converge to the assets fundamental value. The informational efficiency of the market depends on the distribution of the risky asset across risk averse agents. Thes...
متن کاملHerd Behavior and Nonfundamental Asset Price Fluctuations in Financial Markets
In this paper we investigate the effects of herding on asset price dynamics during continuous trading. We focus on the role of interaction among traders, and we investigate the dynamics emerging when we allow for a tendency to mimic the actions of other investors, that is, to engage in herd behavior. The model, built as a mean field in a binary setting (buy/sell decisions of a risky asset), is ...
متن کاملHerd behavior and aggregate fluctuations in financial markets 1
We present a simple model of a stock market where a random communication structure between agents generically gives rise to a heavy tails in the distribution of stock price variations in the form of an exponentially truncated power-law, similar to distributions observed in recent empirical studies of high frequency market data. Our model provides a link between two well-known market phenomena: ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Physical Review Letters
سال: 2000
ISSN: 0031-9007,1079-7114
DOI: 10.1103/physrevlett.85.5659