Stock market herding behavior linked to heavy-tailed price fluctuations
The article explores how people in financial markets tend to copy each other's actions, leading to extreme fluctuations in stock prices. By studying market data, the researchers found that these fluctuations follow a specific pattern known as an exponentially truncated power law. This pattern links the heavy tails in stock market returns to the tendency of investors to imitate each other, creating a connection between market order flow and the unusual behavior of asset returns.