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Group-Wise Herding Behavior in Financial Markets: An Agent-Based Modeling Approach.
- Source :
-
PLoS ONE . Apr2014, Vol. 9 Issue 4, p1-7. 7p. - Publication Year :
- 2014
-
Abstract
- In this paper, we shed light on the dynamic characteristics of rational group behaviors and the relationship between monetary policy and economic units in the financial market by using an agent-based model (ABM), the Hurst exponent, and the Shannon entropy. First, an agent-based model is used to analyze the characteristics of the group behaviors at different levels of irrationality. Second, the Hurst exponent is applied to analyze the characteristics of the trend-following irrationality group. Third, the Shannon entropy is used to analyze the randomness and unpredictability of group behavior. We show that in a system that focuses on macro-monetary policy, steep fluctuations occur, meaning that the medium-level irrationality group has the highest Hurst exponent and Shannon entropy among all of the groups. However, in a system that focuses on micro-monetary policy, all group behaviors follow a stable trend, and the medium irrationality group thus remains stable, too. Likewise, in a system that focuses on both micro- and macro-monetary policies, all groups tend to be stable. Consequently, we find that group behavior varies across economic units at each irrationality level for micro- and macro-monetary policy in the financial market. Together, these findings offer key insights into monetary policy. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 19326203
- Volume :
- 9
- Issue :
- 4
- Database :
- Academic Search Index
- Journal :
- PLoS ONE
- Publication Type :
- Academic Journal
- Accession number :
- 95818298
- Full Text :
- https://doi.org/10.1371/journal.pone.0093661