Grafting of higher-order correlations of real financial markets into herding models

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• 作者：Sanghyun Ahn ; Gyuchang Lim ; Sooyong Kim ; Kyungsik Kim
• 关键词：EZ model ; Correlation ; KOSPI ; KRW-USD
• 刊名：Physica A
• 出版年：2009
• 出版时间：1 August 2009-15 August 2009
• 年：2009
• 卷：388
• 期：15-16
• 页码：3195-3201
• 全文大小：1380 K

文摘

In this work, we graft the volatility clustering observed in empirical financial time series into the Equiluz and Zimmermann (EZ) model, which was introduced to reproduce the herding behaviors of a financial time series. The original EZ model failed to reproduce the empirically observed power-law exponents of real financial data. The EZ model ordinarily produces a more fat-tailed distribution compared to real data, and a long-range correlation of absolute returns that underlie the volatility clustering. As it is not appropriate to capture the empirically observed correlations in a modified EZ model, we apply a sorting method to incorporate the nonlinear correlation structure of a real financial time series into the generated returns. By doing so, we observe that the slow convergence of distribution of returns is well established for returns generated from the EZ model and its modified version. It is also found that the modified EZ model leads to a less fat-tailed distribution.