• 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