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

Research output: Contribution to journalArticle

6 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)1208-1214
Number of pages7
JournalPhysica A: Statistical Mechanics and its Applications
Volume389
Issue number6
DOIs
Publication statusPublished - 2010 Mar 15
Externally publishedYes

Keywords

  • Asymmetric volatility
  • Borrowing constraint
  • Econophysics
  • Herding
  • Spin model
  • Volatility clustering

ASJC Scopus subject areas

  • Statistics and Probability
  • Condensed Matter Physics

Fingerprint Dive into the research topics of 'Asymmetric volatility, volatility clustering, and herding agents with a borrowing constraint'. Together they form a unique fingerprint.

  • Cite this