Fear of missing out and market stability: A networked minority game approach

Daehyeon Park, Doojin Ryu and Robert I. Webb

Physica A: Statistical Mechanics and its Applications, 2024, vol. 634, issue C

Abstract: This study examines the influence of the fear of missing out (FOMO), which spreads through social networks, on financial market stability. We extend the networked evolutionary minority game model, a widely used methodology in econophysics, by incorporating the asymmetric reward structure and investors’ FOMO. The agent-based simulation results reveal that the asymmetric reward structure significantly improves the stability of the system. In contrast, the FOMO significantly reduces market stability. FOMO-induced irrational behavior disrupts the market’s normal functioning, leading to decreased stability. However, as agents become more interconnected and actively adapt their strategies, the adverse effects of FOMO on the system diminish.

Keywords: Agent-based simulation; Econophysics; Fear of missing out (FOMO); Market stability; Networked evolutionary minority game (search for similar items in EconPapers)
JEL-codes: C63 D85 G41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:634:y:2024:i:c:s0378437123009755

DOI: 10.1016/j.physa.2023.129420

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