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

  • Iori, G.
  • Tedeschi, G.

We introduce an order driver market model with heterogeneous traders that imitate each other on a dynamic network structure. The communication structure evolves endogenously via a fitness mechanism based on agents performance. We assess under which assumptions imitation, among otherway noise traders, can give rise to the emergence of gurus and their rise and fall in popularity over time. We study the wealth distribution of gurus, followers and non followers and show that traders have an incentive to imitate and to be imitated since herding turns out to be profitable.

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Paper provided by Department of Economics, City University London in its series Working Papers with number 10/05.

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Date of creation: 2010
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Handle: RePEc:cty:dpaper:10/05
Contact details of provider: Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
Phone: +44 (0)20 7040 8500
Web page: http://www.city.ac.uk

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