Social network influence and market instability

Yang, Jing

doi:10.1016/j.jmateco.2008.10.002

Cited by 11 publications

(3 citation statements)

References 52 publications

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“…The generic forecast ft,h (which can differ across types and over time) permits a potentially non-linear response to past prices, such as non-linear trend-following rules. In addition, ft,h may contain type-specific "fixed effects," be subject to random disturbances, or be influenced by social networks as in Yang (2009) or Panchenko et al (2013). Assumption 1 in Brock and Hommes (1998) is nested by (3) when c = 0 and ft,h = E t p * t+1 + g h (x t−1 , .…”

Section: Assumption 1 All Price Beliefs Are Of the Formmentioning

confidence: 99%

Solving heterogeneous-belief asset pricing models with short-selling constraints and many agents

Hatcher

2024

Macroecon. Dynam.

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Short-selling constraints are common in financial markets, while physical assets such as housing often lack markets for short-selling altogether. As a result, investment decisions are often restricted by such constraints. This paper studies asset prices in behavioral heterogeneous-belief models with short-selling constraints and arbitrarily many belief types. We provide conditions on beliefs such that short-selling constraints bind for different types, along with analytic expressions for price and demands that allow us to construct fast solution algorithms relevant for a wide range of models. An application studies how an alternative uptick rule, as in the United States, affects price dynamics and wealth distribution in a market with many belief types in evolutionary competition. In a numerical example, we highlight a scenario in which a modified version of the alternative uptick rule, triggered by smaller percentage falls in price, reduces both asset mispricing and wealth inequality relative to the current regulation. As extensions, we show how our method applies to multiple asset markets with short-selling constraints, additional heterogeneities, and price setting by a market maker.

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Section: Assumption 1 All Price Beliefs Are Of the Formmentioning

confidence: 99%

Solving heterogeneous-belief asset pricing models with short-selling constraints and many agents

Hatcher

2024

Macroecon. Dynam.

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“…As regards asset price dynamics, opinion (investment behavior) may take continuous values. For example, in [74] the expectation of agent i about the future price of an asset is influenced by the opinion of all other N agents, including himself:…”

Section: Continuous Modelsmentioning

confidence: 99%

Dynamics of Social Influence and Knowledge in Networks: Sociophysics Models and Applications in Social Trading, Behavioral Finance and Business

Tsintsaris,

Tsompanoglou,

Ioannidis

2024

Mathematics

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In this paper we offer a comprehensive review of Sociophysics, focusing on relevant models as well as selected applications in social trading, behavioral finance and business. We discuss three key aspects of social diffusion dynamics, namely Opinion Dynamics (OD), Group Decision-Making (GDM) and Knowledge Dynamics (KD). In the OD case, we highlight special classes of social agents, such as informed agents, contrarians and extremists. As regards GDM, we present state-of-the-art models on various kinds of decision-making processes. In the KD case, we discuss processes of knowledge diffusion and creation via the presence of self-innovating agents. The primary question we wish to address is: to what extent does Sociophysics correspond to social reality? For that purpose, for each social diffusion model category, we present notable Sociophysics applications for real-world socioeconomic phenomena and, additionally, we provide a much-needed critique of the existing Sociophysics literature, so as to raise awareness of certain issues that currently undermine the effective application of Sociophysics, mainly in terms of modelling assumptions and mathematical formulation, on the investigation of key social processes.

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“…The generic forecast ft,h (which can differ across types and over time) permits a potentially non-linear response to past prices, such as non-linear trend-following rules. In addition, ft,h may contain type-specific 'fixed effects', be subject to random disturbances, or be influenced by social networks as in Yang (2009) or Panchenko et al (2013). Assumption 1 in Brock and Hommes (1998)…”

Section: Price Beliefsmentioning

confidence: 99%

Solving Heterogeneous-Belief Asset Pricing Models With Short-Selling Constraints and Many Agents

Hatcher

2022

SSRN Journal

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Social network influence and market instability

Cited by 11 publications

References 52 publications

Solving heterogeneous-belief asset pricing models with short-selling constraints and many agents

Solving heterogeneous-belief asset pricing models with short-selling constraints and many agents

Dynamics of Social Influence and Knowledge in Networks: Sociophysics Models and Applications in Social Trading, Behavioral Finance and Business

Solving Heterogeneous-Belief Asset Pricing Models With Short-Selling Constraints and Many Agents

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