Herding Effect Analysis In Economic Activities

The mathematic description of herd effect can be regarded as the degree of deviation Pt=E[Pt+1+dt+1]/(1＋rt+1)between buying production price and investor expect.The study on it starts early so that this phenomenon merges economics analysis and mathematic analysis.The early study tends to the financial model establishment or analysis through applying economic analysis in financial market.However,it is necessary to use mathematic model to analyze any kind of social economic phenomenon.During recent years,the study on herd effect is carrying on all the time among which the most reprehensive are using to measure the index H(i,t)=|P(i,t)-E[P(i,t)]|-AF(i,t)in transaction in LSV model,using to measure the cross-section in CCK model.They are all the indexes of herd effect.Mainly based on the models mentioned before,this dissertation uses regression analysis and cluster analysis to analyze the samples tentatively.This dissertation introduces the mathematic model of herd effect in detail and analyzes it in brlef.Moreover,information flow model of Baneirjee,p=lim2-((p-p2)2/n)/2=1, presents the possibility of herd effect obviously on condition that the information is skew.The essay also concludes the scope of application of these various kinds of models and hypothesizes some confused phenomenon that happened to LSV model,CH model and CCK model in certain special situations.According to the price mechanism,setting up the model can analyze the theorem of herd effect successfully.Pricing mechanism Pr=E(V|H.)is can be resulted,that is,when feedback coefficient x>0,P(t>0)>0(n<|C|);when feedback coefficient x>1,P(n≥2)>0(nâ†'∞). Based on the assumption, the probability of occurrence of the herd effect is more than zero and when feedback coefficient is more than one, herd effect is presented absolutely.Game theory, playing a great part in building models, is not only used as a analysis tool for various factors in financial market but also a bond to analyze the phenomenon in mathematic theory. The latter part of this essay applies V.Pareto’s Game model and barging model, which analyze the situation of economic market. The change of price fluctuation and relative value with or without noise are mainly considered in market trade. Based on Game theory, this essay discusses important decision value, including demand function, clearing conditions and relative gains. Through analyzing the financial market phenomenon with variation among the factors in Game theory, the essay explains the Game program in herd effect directly.