Herd formation and information transmission in a population: Non-universal behaviour

D. F. Zheng, P. M. Hui, K. F. Yip, Neil F Johnson

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

We present generalized dynamical models describing the sharing of information, and the corresponding herd behavior, in a population based on the recent model proposed by Eguíluz and Zimmermann (EZ) [Phys. Rev. Lett. 85, 5659 (2000)]. The EZ model, which is a dynamical version of the herd formation model of Cont and Bouchaud (CB), gives a reasonable model for the formation of clusters of agents and for actions taken by clusters of agents. Both the EZ and CB models give a cluster size distribution characterized by a power law with an exponent -5/2. By introducing a size-dependent probability for dissociation of a cluster of agents, we show that the exponent characterizing the cluster size distribution becomes model-dependent and non-universal, with an exponential cutoff for large cluster sizes. The actions taken by the clusters of agents generate the price returns, the distribution of which is also characterized by a model-dependent exponent. When a size-dependent transaction rate is introduced instead of a size-dependent dissociation rate, it is found that the distribution of price returns is characterized by a model-dependent exponent while the exponent for the cluster-size distribution remains unchanged. The resulting systems provide simplified models of a financial market and yield power law behaviour with an easily tunable exponent.

Original languageEnglish (US)
Pages (from-to)213-218
Number of pages6
JournalEuropean Physical Journal B
Volume27
Issue number2
StatePublished - May 2 2002
Externally publishedYes

Fingerprint

data transmission
exponents
dissociation
cut-off

Keywords

  • 02.50.Le Decision theory and game theory 05.45.Tp Time series analysis
  • 05.65.+b Self-organized systems
  • 87.23.Ge Dynamics of social systems

ASJC Scopus subject areas

  • Electronic, Optical and Magnetic Materials
  • Condensed Matter Physics

Cite this

Zheng, D. F., Hui, P. M., Yip, K. F., & Johnson, N. F. (2002). Herd formation and information transmission in a population: Non-universal behaviour. European Physical Journal B, 27(2), 213-218.

Herd formation and information transmission in a population : Non-universal behaviour. / Zheng, D. F.; Hui, P. M.; Yip, K. F.; Johnson, Neil F.

In: European Physical Journal B, Vol. 27, No. 2, 02.05.2002, p. 213-218.

Research output: Contribution to journalArticle

Zheng, DF, Hui, PM, Yip, KF & Johnson, NF 2002, 'Herd formation and information transmission in a population: Non-universal behaviour', European Physical Journal B, vol. 27, no. 2, pp. 213-218.
Zheng, D. F. ; Hui, P. M. ; Yip, K. F. ; Johnson, Neil F. / Herd formation and information transmission in a population : Non-universal behaviour. In: European Physical Journal B. 2002 ; Vol. 27, No. 2. pp. 213-218.
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