Stylized facts from a threshold-based heterogeneous agent model

DOI10.1140/EPJB/E2007-00108-5MaRDI QIDQ978829zbMATH OpenOpenAlexFDO

Authors T. Seaman, Rod Cross, M. Grinfeld, Harbir Lamba

Publication date 25 June 2010

Published in The European Physical Journal B. Condensed Matter and Complex Systems (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/physics/0607290, https://strathprints.strath.ac.uk/6210/

Mathematics Subject Classification ID

Economic time series analysis (91B84) Auctions, bargaining, bidding and selling, and other market models (91B26) Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Heterogeneous agent models (91B69)

Abstract: A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour suggested by the efficient market hypothesis (EMH). By introducing different propensities into a baseline model that displays EMH behaviour, one can attempt to isolate their effects upon the market dynamics. The simulation results indicate that the introduction of a herding propensity results in excess kurtosis and power-law decay consistent with those observed in actual return distributions, but not in significant long-term volatility correlations. Possible alternatives for introducing such long-term volatility correlations are then identified and discussed.

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Cites work

• scientific article; zbMATH DE number 2225994 (Why is no real title available?)
• Introduction to Econophysics
• Iterated Random Functions
• VOLATILITY CLUSTERING IN FINANCIAL MARKETS: A MICROSIMULATION OF INTERACTING AGENTS

Cited in

(7)

• Hopf bifurcation in symmetric networks of coupled oscillators with hysteresis
• Robust mathematical formulation and probabilistic description of agent-based computational economic market models
• A model of information flows and confirmatory bias in financial markets
• Behavioural breaks in the heterogeneous agent model: the impact of herding, overconfidence, and market sentiment
• A discussion of Hong-Stein model
• Dynamics of discrete time systems with a hysteresis stop operator
• MARKET STATISTICS OF A PSYCHOLOGY-BASED HETEROGENEOUS AGENT MODEL

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