A herding model with preferential attachment and fragmentation

G.J. Rodgers and Dafang Zheng

Physica A: Statistical Mechanics and its Applications, 2002, vol. 308, issue 1, 375-380

Abstract: We introduce and solve a model that mimics the herding effect in financial markets when groups of agents share information. The number of agents in the model is growing and at each time step either: (i) with probability p an incoming agent joins an existing group, or (ii) with probability 1−p a group is fragmented into individual agents. The group size distribution is found to be power law with an exponent that depends continuously on p. A number of variants of our basic model are discussed. Comparisons are made between these models and other models of herding and random growing networks.

Keywords: Fragmentation; Preferential attachment; Herding; Financial markets (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:308:y:2002:i:1:p:375-380

DOI: 10.1016/S0378-4371(02)00556-3

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