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Title
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Stochastic modelling of herd behaviour indices
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Author
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Abstract
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| This paper proposes different diffusion processes to model herd behaviour indices such as the Herd Behaviour Index (HIX). These models arise by combining popular mean-reverting processes with simple algebraic functions mapping the definition domain of the underlying mean-reverting process to the unit interval. The so obtained Itô processes preserve, to some extent, the mean-reverting trend of the underlying process while satisfying the fundamental properties of the so-called herd behaviour indices. In a numerical study, we calibrate the different model settings to time series data for a period spanning from January 2000 until October 2009 and investigate their ability to predict the future behaviour of herd behaviour indices. |
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Language
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English
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Source (journal)
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Quantitative finance. - London
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Publication
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London
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2015
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ISSN
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1469-7688
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DOI
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10.1080/14697688.2015.1007075
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Volume/pages
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15
:12
(2015)
, p. 1963-1977
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ISI
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000365285500004
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Full text (Publisher's DOI)
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Full text (open access)
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Full text (publisher's version - intranet only)
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