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Herding behavior of financial analysts : a model of self-organized criticality


Reference:

Krause, A., 2004. Herding behavior of financial analysts : a model of self-organized criticality. In: Galegatti, M., Kirman, A. and Marsili, M., eds. The Complex Dynamics of Economic Interaction. London, U. K.: Springer-Verlag, pp. 257-267. (Lecture Notes in Economics and Mathematical Systems; 531/Part IV)

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Official URL:

http://dx.doi.org/10.1007/978-3-642-17045-4_15

Abstract

We investigate a simple model of investment recommendations issued by financial analysts in different industries. Financial analysts are influenced by the recommendations of some of their colleagues in the same industry as well as their own recommendations in certain other industries. Describing the relations with other financial analysts and among industries as a graph, we derive the complex dynamics of investment recommendations as relations change over time according to a simple rule, resulting in self-organized criticality. We show that financial analysts are more likely to be optimistic about industries that are unrelated to other industries than about industries that are related to others.

Details

Item Type Book Sections
CreatorsKrause, A.
EditorsGalegatti, M., Kirman, A. and Marsili, M.
DOI10.1007/978-3-642-17045-4_15
DepartmentsSchool of Management
StatusPublished
ID Code26854

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