The apparent randomness of the stock market is only skin-deep, as a glance at the statistics shows. Take for example the 'price return'. That is, exactly the spread you'd get from a random process like tossing a coin. Researchers Victor Eguiluz and Martin Zimmermann, of the Mediterranean Institute for Advanced Study, Mallorca, Spain, wondered what would happen to the returns if, instead of acting alone, brokers followed herd instinct, just as sheep move en masse across a hillside, or as migrating wildebeest pour across the plains of Africa. The 'herd' idea makes some sense.
Brokers act on rumours that spread across the market floor.
Big transactions trigger other brokers into action. While waiting, agents made random links to other agents, building up a network. When one agent bought or sold, all the others in that agent's network did the same. Summing up the calculated returns the researchers did indeed find a power law describing how often a return of a given size was made. This, they argue, shows that the power law in the market statistics could be explained by copycat behaviour amongst brokers.