Herding effects in order driven markets: the rise and fall of gurus

We introduce an order driver market model with heterogeneous traders that imitate each other on a dynamic network structure. The communication structure is endogenous and evolves using a fitness mechanism based on agents wealth. We assess how imitations among otherway noise traders, can give rise to herd behaviour and how this behaviour affects asset prices. We show how price paths are strongly biased in the direction of the herd. Using a fitness mechanism then we study under which conditions a guru may rise and fall over time and his ability to manipulate the market. So purchases by guru may trigger sufficient purchases by imitators to allow the guru to make profit. In this setting we study the wealth distribution of guru, imitators and no-imitators.