The time delay restraining the herd behavior with Bayesian approach

Guang-Yan Zhong, Jiang-Cheng Li, George J. Jiang, Hai-Feng Li and Hui-Ming Tao

Physica A: Statistical Mechanics and its Applications, 2018, vol. 507, issue C, 335-346

Abstract: We explore the herd behavior of stock prices influenced by the time delay in a finance system with the delayed Heston model. On the basis of a Bayesian approach for delayed Heston model that we proposed and parameter Bayesian estimation, we simulate the absolute deviation between mean residence time of positive and negative returns to characterize the herd behavior. In the plots of absolute deviation against the mean reversion long-run variance of volatility or cross correlation between two Wiener processes of stock price and volatility, the results demonstrate an increasing phenomenon of herd behavior with increasing delay time. In the plot of absolute deviation against the amplitude of volatility fluctuations, the result indicates an optimal delay time matching minimum herd behavior, i.e., the time delay restrains the herd behavior. Also, the optimal mean reversion long-run variance of volatility and cross correlation concerning minimum herd behavior can be observed.

Keywords: Bayesian method; Time delay; Herd behavior; Mean residence time; Econophysics (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437118305612
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:507:y:2018:i:c:p:335-346

DOI: 10.1016/j.physa.2018.05.024

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().