The Application Of Finite-state Markov Chain In The Group Formation And Herd Behaviour

Markov chain has Markov property, if we kown the current state, we can predictthe state of the future time, it has nothing to do with the past stste. This favourableproperty has very wide application value in the compute, management and financefiled. In this paper, we study the traditional EZ model through Markov chain, weestabilish a Markov chain model of simple groups forming randomly. According tothe transition matrix, we can work out the stationary distribution and equilibrium stateof Markov chain, so as to analyse the transaction in the financial market. Herdbehavior is a special phenomenon in the financial market, it has a significant effect onthe stability and efficiency of financial market. We also study the model of groupattitude evolution through Markov chain, the Markov chain corresponding to themodel reflects the process of group attitude evolution. We work out the stationarydistribution corresponding to Markov transition matrix and discuss the influence onthe parameter to stationary distribution, so as to analyse the influence of herdbehavior generation.