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27 July 2017
 
  » arxiv » cond-mat/9908069

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Transmission of Information and Herd Behavior: an Application to Financial Markets
Victor M. Eguiluz ; Martin G. Zimmermann ;
Rating Members: 3.41/5 (1 reader) | Visitors: 4/5 (1 visitor)
Date 4 Aug 1999
Journal Phys. Rev. Lett. 85, 5659-5662 (2000)
Subject Condensed Matter; Adaptation and Self-Organizing Systems | cond-mat nlin.AO
AffiliationIMEDEA, Palma de Mallorca, Spain
AbstractWe propose a model for stochastic formation of opinion clusters, modelled by an evolving network, and herd behaviour 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 of the returns with exponential cut-off. However for h>h* an increase in the probability of large returns is found, and may be associated to the occurrence of large crashes.
Source arXiv, cond-mat/9908069
Other source [GID 103127] pmid11136071
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1 review found:
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1. Science-advisor.net review 05090022 (1 reader)    * Rate this comment.
Review title: Origin of the fat tail
Reviewer: reviewer22
Date: 26 September 2005 at 21:43 GMT.
Comment: The authors introduce the dynamical version of the Cont and Bouchaud model. This model simulates how agents follow the same information when [...]

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