Effects of common factors on dynamics of stocks traded by investors with limited information capacity

DOI10.1155/2017/6831596MaRDI QIDQ1784890zbMATH OpenOpenAlexFDO

Authors Songtao Wu, Chao Wang, Jianmin He

Publication date 27 September 2018

Published in Discrete Dynamics in Nature and Society (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2017/6831596

zbMATH Keywords

dynamics of stocksinvestorslimited information capacity

Mathematics Subject Classification ID

Portfolio theory (91G10) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

Summary: An artificial stock market with agent-based model is built to investigate effects of different information characteristics of common factors on the dynamics stock returns. Investors with limited information capacity update their beliefs based on the information they have obtained and processed and optimize portfolios based on beliefs. We find that with changing of concerned information characteristics the uncertainty of stock price returns rises and is higher than the uncertainty of intrinsic value returns. However, this increase is constrained by the limited information capacity of investors. At the same time, we also find that dependence between returns of stock prices also increased with the changing information environment. The uncertainty and dependency pertaining to prices show a positive relationship. However, the positive relationship is weakened when taking into account the features of intrinsic values, based on which prices are generated.

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Cites work

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Cited in

(2)

• Static and dynamic factors in an information-based multi-asset artificial stock market
• Effects of fundamentals acquisition and strategy switch on stock price dynamics

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