Should Network Structure Matter in

Abstract. We derive microscopic foundations for a well-known probabilistic herding model in the agent-based finance litera-ture. Lo and behold, the model is quite robust with respect to behavioral heterogeneity, yet structural heterogeneity, in the sense of an underlying network structure that describes the very feasibility of agent interaction, has a crucial and non-trivial im-pact on the macroscopic properties of the model. Key words: Herding, networks, mean-field approach, N-dependence. “Investors spend a substantial part of their leisure time dis-cussing investments, reading about investments, or gossiping about others ’ successes or failures in investing. ” (Robert J. Shiller)