Title of article
Application of Zhangs square root law and herding to financial markets
Author/Authors
Friedrich Wagner، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2006
Pages
16
From page
369
To page
384
Abstract
We apply an asymmetric version of Kirmanʹs herding model to volatile financial markets. In the relation between returns and agent concentration we use the square root law proposed by Zhang. This can be derived by extending the idea of a critical mean field theory suggested by Plerou et al. We show that this model is equivalent to the so called model of stochastic volatility. The description of the unconditional distribution for the absolute returns is in good agreement with the DAX independent whether one uses the square root or a conventional linear relation. Only the statistic of extreme events prefers the former. The description of the autocorrelations are in much better agreement for the square root law. The volatility clusters are described by a scaling law for the distribution of returns conditional to the value at the previous day in good agreement with the data
Journal title
Physica A Statistical Mechanics and its Applications
Serial Year
2006
Journal title
Physica A Statistical Mechanics and its Applications
Record number
870803
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