"Herd on Wall Street," by Fenella Saunders. Discover, June 2001.
The article reports on a computer program created by Victor Eguiluz and Martin Zimmerman in which software agents (brokers) randomly buy, sell, or share information when they receive a stock tip (rumor). The "brokers" are linked together, and when the researchers vary the speed at which they share the rumors, the model replicates actual stock market patterns. "Fast-spreading rumors produced large price variations, while slow ones yielded smaller, noisy fluctuations." Zimmerman concludes that "If just a few percent of the people who receive the tip follow it, it can have an amazing effect on the market."
For another article on the topic, see "Stockbrokers May Act Like Sheep," by Mark Haw, Nature Science Update, 3 January 2001.
--- Annette Emerson