Asymmetric volatility, volatility clustering, and herding agents with a borrowing constraint

Ryuichi Yamamoto ()

Physica A: Statistical Mechanics and its Applications, 2010, vol. 389, issue 6, 1208-1214

Abstract: Recent empirical research has documented asymmetric volatility and volatility clustering in stock markets. We conjecture that a limit of arbitrage due to a borrowing constraint and herding behavior by investors are related to these phenomena. This study conducts simulation analyses on a spin model where borrowing constrained agents imitate their nearest neighbors but switch their strategies to a different one intermittently. We show that herding matters for volatility clustering while a borrowing constraint intensifies the asymmetry of volatility through the herding effect.

Keywords: Econophysics; Asymmetric volatility; Volatility clustering; Spin model; Borrowing constraint; Herding (search for similar items in EconPapers)
Date: 2010
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:389:y:2010:i:6:p:1208-1214

DOI: 10.1016/j.physa.2009.11.038

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