Group-Wise Herding Behavior in Financial Markets: An Agent-Based Modeling Approach

Group-Wise Herding Behavior in Financial Markets: An Agent-Based Modeling Approach

In this paper, we shed light on the dynamic characteristics of rational group behaviors and the relationship between monetary policy and economic units in the financial market by using an agent-based model (ABM), the Hurst exponent, and the Shannon entropy. First, an agent-based model is used to analyze the characteristics of the group behaviors at different levels of irrationality. Second, the...

Herding and Contrarian Behavior in 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 the conditions on the underlying information structure that are necessary and sufficient for informational herding and contrarianism. In a standard sequential security trading model, subject to sufficient noise trading, peop...

SUPPLEMENT TO “ HERDING AND CONTRARIAN BEHAVIOR IN FINANCIAL MARKETS ” ( Econometrica

Herding and Contrarian Behaviour in Financial Markets

Rational herd behaviour and informationally efficient security prices have long been considered to be mutually exclusive but for exceptional cases. In this paper we describe the conditions on the underlying information structure that are necessary and sufficient for informational herding and contrarianism. In a standard sequential security trading model, subject to sufficient noise trading, peo...

Complexity in Financial Markets: Modeling Psychological Behavior in Agent-Based Models and Order Book Models

Physics community has shown an increasing interest in the study of Social Sciences, in particular Economics, in the last 25 years [1, 2]. The growing popularity of this field arises, roughly speaking, from two main reasons. The former one lies in the huge amount of empirical data that are produced by financial markets. In order to make a comparison with some traditional fields of Physics, a sim...