dorsal/arxiv
View SchemaThe Impact of External Events on the Emergence of Social Herding of Economic Sentiment
| Authors | Martin Hohnisch, Dietrich Stauffer, Sabine Pittnauer |
|---|---|
| Categories | |
| ArXiv ID | physics/0606237 |
| URL | https://arxiv.org/abs/physics/0606237 |
Abstract
We investigate the impact of an exogenous environment on the emergence of social herding of economic sentiment. An interactions-driven dynamics of economic sentiment is modeled by an Ising model on a large (two-dimensional) square lattice. The individual states are called optimism and pessimism. The exogenous environment is modeled as a sequence of random events, which might have a positive or negative influence on economic sentiment. These exogenous events can be frequent or rare, have a lasting impact or a non-lasting impact. Impact of events is inhomogeneous over the lattice, as individuals might fail to perceive particular events. We introduce two notions of social herding: permanent herding refers to the situation where an ordered state (i.e. a state with an overwhelming majority of optimists or pessimists) persists over an infinite time horizon, while temporary herding refers to the situation where ordered states appear, persist for some time and decay. The parameter of the inter-agent interaction strength is such as to engender permanent herding without the influence of the environment. To investigate the impact of an environment we determine whether an initially ordered state decays. We consider two cases: in the first case positive and negative events have both the same empirical frequencies and strengths, while in the second case events have the same empirical frequencies but different strengths. (In the first case the environment is ``neutral''in the long term), In the neutral case we find temporary herding if events are sufficiently ``strong'' and/or perceived by a sufficiently large proportion of agents, and our results suggest that permanent herding occurs for small values of the parameters. In the ``non-neutral'' case we find only temporary herding.
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"abstract": "We investigate the impact of an exogenous environment on the emergence of\nsocial herding of economic sentiment. An interactions-driven dynamics of\neconomic sentiment is modeled by an Ising model on a large (two-dimensional)\nsquare lattice. The individual states are called optimism and pessimism. The\nexogenous environment is modeled as a sequence of random events, which might\nhave a positive or negative influence on economic sentiment. These exogenous\nevents can be frequent or rare, have a lasting impact or a non-lasting impact.\nImpact of events is inhomogeneous over the lattice, as individuals might fail\nto perceive particular events. We introduce two notions of social herding:\npermanent herding refers to the situation where an ordered state (i.e. a state\nwith an overwhelming majority of optimists or pessimists) persists over an\ninfinite time horizon, while temporary herding refers to the situation where\nordered states appear, persist for some time and decay. The parameter of the\ninter-agent interaction strength is such as to engender permanent herding\nwithout the influence of the environment. To investigate the impact of an\nenvironment we determine whether an initially ordered state decays. We consider\ntwo cases: in the first case positive and negative events have both the same\nempirical frequencies and strengths, while in the second case events have the\nsame empirical frequencies but different strengths. (In the first case the\nenvironment is ``neutral\u0027\u0027in the long term), In the neutral case we find\ntemporary herding if events are sufficiently ``strong\u0027\u0027 and/or perceived by a\nsufficiently large proportion of agents, and our results suggest that permanent\nherding occurs for small values of the parameters. In the ``non-neutral\u0027\u0027 case\nwe find only temporary herding.",
"arxiv_id": "physics/0606237",
"authors": [
"Martin Hohnisch",
"Dietrich Stauffer",
"Sabine Pittnauer"
],
"categories": [
"physics.soc-ph"
],
"title": "The Impact of External Events on the Emergence of Social Herding of Economic Sentiment",
"url": "https://arxiv.org/abs/physics/0606237"
},
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