Volatility clustering and herding agents: Does it matter what they observe?

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

Recent agent-based models have demonstrated that agents' herding behavior causes volatility clustering in stock markets. We examine economies where agents herd on others, yet they have limited sets of information on other agents to imitate. In particular, we conduct experiments on economies with agents with different levels of information sharing where agents can imitate: (1) the strategies of others but with an error, (2) the strategies of only a fraction of agents, or (3) the strategies of others, but update their parameters only by a proportion. In each experiment we change the likelihood that agents make errors to copy the strategy of others, the fraction of agents to herd, or the proportion of the parameter that agents update, in order to examine the effect of the different degrees of information sharing on volatility clustering. We show that volatility clustering tends to disappear when agents have limited information on the strategies of others, and agents need to imitate the strategy details of others in order to generate the clustered volatility.

Original languageEnglish
Pages (from-to)41-59
Number of pages19
JournalJournal of Economic Interaction and Coordination
Volume6
Issue number1
DOIs
Publication statusPublished - 2011 May
Externally publishedYes

Fingerprint

Volatility clustering
Herding
Information sharing
Experiment
Proportion
Limited information
Herding behavior
Stock market
Agent-based model

Keywords

  • Agent-based
  • Herding
  • Learning
  • Volatility clustering

ASJC Scopus subject areas

  • Economics and Econometrics
  • Business and International Management

Cite this

Volatility clustering and herding agents : Does it matter what they observe? / Yamamoto, Ryuichi.

In: Journal of Economic Interaction and Coordination, Vol. 6, No. 1, 05.2011, p. 41-59.

Research output: Contribution to journalArticle

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