dorsal/arxiv
View SchemaStylized facts from a threshold-based heterogeneous agent model
| Authors | R. Cross, M. Grinfeld, H. Lamba, T. Seaman |
|---|---|
| Categories | |
| ArXiv ID | physics/0607290 |
| URL | https://arxiv.org/abs/physics/0607290 |
| DOI | 10.1140/epjb/e2007-00108-5 |
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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"abstract": "A class of heterogeneous agent models is investigated where investors switch\ntrading position whenever their motivation to do so exceeds some critical\nthreshold. These motivations can be psychological in nature or reflect\nbehaviour suggested by the efficient market hypothesis (EMH). By introducing\ndifferent propensities into a baseline model that displays EMH behaviour, one\ncan attempt to isolate their effects upon the market dynamics.\n The simulation results indicate that the introduction of a herding propensity\nresults in excess kurtosis and power-law decay consistent with those observed\nin actual return distributions, but not in significant long-term volatility\ncorrelations. Possible alternatives for introducing such long-term volatility\ncorrelations are then identified and discussed.",
"arxiv_id": "physics/0607290",
"authors": [
"R. Cross",
"M. Grinfeld",
"H. Lamba",
"T. Seaman"
],
"categories": [
"physics.comp-ph",
"q-fin.TR"
],
"doi": "10.1140/epjb/e2007-00108-5",
"title": "Stylized facts from a threshold-based heterogeneous agent model",
"url": "https://arxiv.org/abs/physics/0607290"
},
"schema_id": "dorsal/arxiv",
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"type": "Model",
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