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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…
Decision-changing imitation is a prevalent phenomenon in financial markets, where investors imitate others' decision-changing rates when making their own investment decisions. In this work, we study the optimal investment problem under the…
In this paper, we study the optimal investment problem considering the herd behaviour between two agents, including one leading expert and one following agent whose decisions are influenced by those of the leading expert. In the objective…
Resource allocation takes place in various types of real-world complex systems such as urban traf- fic, social services institutions, economical and ecosystems. Mathematically, the dynamical process of complex resource allocation can be…
We present a formal model for studying fashion trends, in terms of three parameters of fashionable items: (1) their innate utility; (2) individual boredom associated with repeated usage of an item; and (3) social influences associated with…
It is very common to observe crowds of individuals solving similar problems with similar information in a largely independent manner. We argue here that crowds can become "smarter," i.e., more efficient and robust, by partially following…
We study the Merton problem of optimal consumption-investment for the case of two investors sharing a final wealth. The typical example would be a husband and wife sharing a portfolio looking to optimize the expected utility of consumption…
Resource allocation systems provide the fundamental support for the normal functioning and well being of the modern society, and can be modeled as minority games. A ubiquitous dynamical phenomenon is the emergence of herding, where a vast…
Investigations of social influence in collective decision-making have become possible due to recent technologies and platforms that record interactions in far larger groups than could be studied before. Herding and its impact on…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
In this paper, we work in the framework of the Merton problem but we impose a drawdown constraint on the consumption process. This means that consumption can never fall below a fixed proportion of the running maximum of past consumption. In…
This paper studies a life-time consumption-investment problem under the Black-Scholes framework, where the consumption rate is subject to a lower bound constraint that linearly depends on her wealth. It is a stochastic control problem with…
The "standard" Merton formulation of optimal investment and consumption involves optimizing the integrated lifetime utility of consumption, suitably discounted, together with the discounted future bequest. In this formulation the utility of…
We determine the optimal amount to invest in a Black-Scholes financial market for an individual who consumes at a rate equal to a constant proportion of her wealth and who wishes to minimize the expected time that her wealth spends in…
We formulate an infinite-horizon optimal investment and consumption problem, in which an individual forms a habit based on the exponentially weighted average of her past consumption rate, and in which she invests in a Black-Scholes market.…
Whether a population of decision-making individuals will reach a state of satisfactory decisions is a fundamental problem in studying collective behaviors. In the framework of evolutionary game theory and by means of potential functions,…
This study employs a Bayesian Probit model to empirically analyze peer effects and herd behavior among consumers during the "Double 11" shopping festival, using data collected through a questionnaire survey. The results demonstrate that…
Portfolio underdiversification is one of the most costly losses accumulated over a household's life cycle. We provide new evidence on the impact of financial inclusion services on households' portfolio choice and investment efficiency using…
It is widely believed that one's peers influence product adoption behaviors. This relationship has been linked to the number of signals a decision-maker receives in a social network. But it is unclear if these same principles hold when the…