Switching Rates and the Asymptotic Behavior of Herding Models
AbstractMarkov chains have experienced a surge of economic interest in the form of behavioral agent-based models that aim at explaining the statistical regularities of financial returns. We review some of the relevant mathematical facts and show how they apply to agent-based herding models, with the particular goal of establishing their asymptotic behavior because several studies have pointed out that the ability of such models to reproduce the stylized facts hinges crucially on the size of the agent population (typically denoted by n), a phenomenon that is also known as n-dependence. Our main finding is that n-(in)dependence traces back to both the topology and the velocity of information transmission among heterogeneous financial agents
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1595.
Length: 16 pages
Date of creation: Feb 2010
Date of revision:
Markov chains; agent-based finance; herding; N-dependence;
Other versions of this item:
- Albrecht Irle & Jonas Kauschke & Thomas Lux & Mishael Milaković, 2011. "Switching Rates And The Asymptotic Behavior Of Herding Models," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 14(03), pages 359-376.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- G19 - Financial Economics - - General Financial Markets - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-13 (All new papers)
- NEP-CBE-2010-03-13 (Cognitive & Behavioural Economics)
- NEP-CMP-2010-03-13 (Computational Economics)
- NEP-EVO-2010-03-13 (Evolutionary Economics)
- NEP-ORE-2010-03-13 (Operations Research)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Friedrich Wagner & Thomas Lux & Simone Alfarano, 2005.
"Time-Variation of Higher Moments in a Financial Market with Heterogeneous Agents: An Analytical Approach,"
wp05-02, Warwick Business School, Finance Group.
- Alfarano, Simone & Lux, Thomas & Wagner, Friedrich, 2008. "Time variation of higher moments in a financial market with heterogeneous agents: An analytical approach," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 101-136, January.
- Alfarano, Simone & Lux, Thomas & Wagner, Friedrich, 2006. "Time-variation of higher moments in a financial market with heterogeneous agents: An analytical approach," Economics Working Papers 2006,16, Christian-Albrechts-University of Kiel, Department of Economics.
- Alfarano, Simone & Lux, Thomas & Wagner, Friedrich, 2005. "Time-variation of higher moments in a financial market with heterogeneous agents: An analytical approach," Economics Working Papers 2005,14, Christian-Albrechts-University of Kiel, Department of Economics.
- Alfarano, Simone & Lux, Thomas, 2005.
"A noise trader model as a generator of apparent financial power laws and long memory,"
Economics Working Papers
2005,13, Christian-Albrechts-University of Kiel, Department of Economics.
- Alfarano, Simone & Lux, Thomas, 2007. "A Noise Trader Model As A Generator Of Apparent Financial Power Laws And Long Memory," Macroeconomic Dynamics, Cambridge University Press, vol. 11(S1), pages 80-101, November.
- Alfarano, Simone & Milakovic, Mishael, 2009. "Network structure and N-dependence in agent-based herding models," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 78-92, January.
- Simone Alfarano & Thomas Lux & Friedrich Wagner, 2005. "Estimation of Agent-Based Models: The Case of an Asymmetric Herding Model," Computational Economics, Society for Computational Economics, vol. 26(1), pages 19-49, August.
- S. Alfarano & M. Milakovic & M. Raddant, 2013.
"A note on institutional hierarchy and volatility in financial markets,"
The European Journal of Finance,
Taylor & Francis Journals, vol. 19(6), pages 449-465, July.
- Alfarano, Simone & Milakovic, Mishael & Raddant, Matthias, 2011. "A Note on institutional hierarchy and volatility in financial markets," MPRA Paper 30902, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If references are entirely missing, you can add them using this form.