Related papers: Markets, herding and response to external informat…
A growing part of the behavioral finance literature has addressed some of the stylized facts of financial time series as macroscopic patterns emerging from herding interactions among groups of agents with heterogeneous trading strategies…
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
We are looking for the agent-based treatment of the financial markets considering necessity to build bridges between microscopic, agent based, and macroscopic, phenomenological modeling. The acknowledgment that agent-based modeling…
We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…
We propose a Markov jump process with the three-state herding interaction. We see our approach as an agent-based model for the financial markets. Under certain assumptions this agent-based model can be related to the stochastic description…
In this paper, we study the herding phenomena in financial markets arising from the combined effect of (1) non-coordinated collective interactions between the market players and (2) concurrent reactions of market players to dynamic market…
Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…
We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic…
A characteristic feature of complex systems in general is a tight coupling between their constituent parts. In complex socio-economic systems this kind of behavior leads to self-organization, which may be both desirable (e.g. social…
We derive a system of stochastic differential equations simulating the dynamics of the three agent groups with herding interaction. Proposed approach can be valuable in the modeling of the complex socio-economic systems with similar…
We investigate the impact of an exogenous environment on the emergence of social herding of economic sentiment. An interactions-driven dynamics of economic sentiment is modeled by an Ising model on a large (two-dimensional) square lattice.…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…
Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…
We investigate a toy model of inductive interacting agents aiming to forecast a continuous, exogenous random variable E. Private information on E is spread heterogeneously across agents. Herding turns out to be the preferred forecasting…
Herding, where investors imitate others' decisions rather than relying on their own analysis, is a prevalent phenomenon in financial markets. Excessive herding distorts rational decisions, amplifies volatility, and can be exploited by…
We 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,…
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
We present examples of agent-based and stochastic models of competition and business processes in economics and finance. We start from as simple as possible models, which have microscopic, agent-based, versions and macroscopic treatment in…