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A self-adapting herding model: The agent judge-abilities influence the dynamic behaviors

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  • Dong, Linrong

Abstract

We propose a self-adapting herding model, in which the financial markets consist of agent clusters with different sizes and market desires. The ratio of successful exchange and merger depends on the volatility of the market and the market desires of the agent clusters. The desires are assigned in term of the wealth of the agent clusters when they merge. After an exchange, the beneficial cluster’s desire keeps on the same, the losing one’s desire is altered which is correlative with the agent judge-ability. A parameter R is given to all agents to denote the judge-ability. The numerical calculation shows that the dynamic behaviors of the market are influenced distinctly by R, which includes the exponential magnitudes of the probability distribution of sizes of the agent clusters and the volatility autocorrelation of the returns, the intensity and frequency of the volatility.

Suggested Citation

  • Dong, Linrong, 2008. "A self-adapting herding model: The agent judge-abilities influence the dynamic behaviors," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(23), pages 5868-5873.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:23:p:5868-5873
    DOI: 10.1016/j.physa.2008.05.044
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    Cited by:

    1. Ausloos, Marcel, 2021. "Hagiotoponyms in France: Saint popularity, like a herding phase transition," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 566(C).
    2. Hernández, Juan Antonio & Benito, Rosa Marı´a & Losada, Juan Carlos, 2012. "An adaptive stochastic model for financial markets," Chaos, Solitons & Fractals, Elsevier, vol. 45(6), pages 899-908.

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