2 edition of Asset market behaviour in the presence of heterogeneous traders found in the catalog.
Asset market behaviour in the presence of heterogeneous traders
A. S. Hurn
1994 by Glasgow University Department of Political Economy in Glasgow .
Written in English
|Statement||A.S. Hurn, A.D.McDonald and V.A.Muscatelli.|
|Series||Economics discussion paper series / University of Glasgow, Department of Political Economy -- no.9405, Economics discussion paper (University of Glasgow, Department of Political Economy) -- no.9405.|
|Contributions||McDonald, A. D., Muscatelli, V. A.|
Quantitative behavioral finance is a new discipline that uses mathematical and statistical methodology to understand behavioral biases in conjunction with of this endeavor has been led by Gunduz Caginalp (Professor of Mathematics and Editor of Journal of Behavioral Finance during –) and collaborators including Vernon L. Smith ( Nobel Laureate in Economics), David. For active traders, the trading technology varies according to the set of assets that they can ∗ We would like to thank the SED for giving us the opportunity to present our new aggregation results and our heterogeneous belief ﬁndings as part of the plenary lecture in Soul Korea in June of
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Recent developments on the role of heterogeneous beliefs on asset pricing and the adaptive behaviour of financial markets shed light into the complex behaviour of financial markets and provide some explanations of certain market behaviour and by: 4.
This article studies the dynamic behavior of security prices in the presence of investors' heterogeneous beliefs. We provide a tractable continuous-time pure-exchange model and highlight the mechanism through which investors' differences of opinion enter into security prices.
In the determination of equilibrium, Cited by: power and calibration issue of heterogeneous asset pricing models by presenting a simple stochastic market fraction asset pricing model of two types of traders (fundamentalists and trend followers) under a market maker scenario.
It seeks to explain aspects of ﬁnan-cial market behavior (such as market dominance, convergence of the market price. He and Li () show that with the presence of adaptive heterogeneous agents, a rational route to market instability arises, and the adaptive switching behavior of agents can increase market.
This paper develops a utility-based heterogeneous agent model for empirically investigating intraday traders’ behaviors. Two types of agents, which consist of fundamental traders and technical analysts, are considered in the proposed model.
They differ in the expectation of future asset returns and the perceived by: 2. responses under identical information can result from heterogeneous beliefs about the other subjects’ cognitive abilities. 3 Biais and Bossaerts call these trades controversial since each trader thinks that the other party makes a bad deal, given their speculative valuations.
The presence of similar, speculative trades are also suggested. In real markets, however, traders have different information on traded assets and process information differently, therefore the assumption of homogeneous rational traders may not be appropriate.
The efficient market hypothesis motivates the use of random walk increments in financial time series modeling: if news about fundamentals are normally distributed, the returns on an asset will be normal Cited by: In order to model the stock market behavior and characterize asset price and wealth dynamics arising form interactions of heterogeneous agents, this paper studies the price dynamics induced by two of the most commonly used financial trading strategies.
asset prices are a strong predictor of trading behavior, indicating a possible role for a type of herd behavior, in which subjects erroneously use the price as a signal of asset value. † Constantinides and Duﬃe (), Asset Pricing with Heterogeneous Consumers, Journal of Political Economy– Grossman and Shiller (), Consumption correlatedness and risk measurement in economies with non-traded assets and heterogenous information, Journal of Financial Econom File Size: 44KB.
dynamics under different trading protocols in the market populated by two types of traders: chartists and noise traders. The proportions of both types are ﬁxed.
Bottazzi et al. ﬁnd that market architecture plays a larger role in shaping the time series properties than the behavioral aspects Cited by: It uses a bottom-up modelling approach to incorporate the interaction of adaptively heterogeneous behaviour of traders and to examine the complex market behaviour in aggregation.
The rest of the article is structured as follows. Section 2 details our contributions to the literature. Section 3 presents. We present an agent based model of a single asset financial market that is capable of replicating several non-trivial statistical properties observed in real financial markets, generically referred to as stylized facts.
While previous models reported in the literature are also capable of replicating some of these statistical properties, in general, they tend to oversimplify either the trading Cited by: 5. We design an experiment to study the determinants of price movement and consumption smoothing behavior across asset markets populated with varying proportion of traders having induced motive to smooth consumption.
The extent of over-pricing is higher when traders with no induced motive to trade Author: Edward Halim, Yohanes Eko Riyanto, Nilanjan Roy. On the Role of Idiosyncratic Participants with Heterogeneous Information Ha V.
Dang Mi Lin University of Lincoln University of Lincoln This version: 24 September Abstract: This paper examines herd behaviour using aggregate market data for stocks, with a focus on the role of idiosyncratic participants with heterogeneous by: Within our model, the stock market is characterized by the presence of a market maker who mediates transactions in the market, populated by a time varying number of market participants (which can behave as fundamentalists or contrarians), and sets the price in response to excess demand or by: 5.
We examine an asset pricing model of Westerhoff (). The model incorporates heterogeneous beliefs among traders, specifically fundamentalists and trend-chasing chartists. The form of the model is shown here to be a nonlinear planar map.
Since it contains a single parameter, the model may be considered the simplest effective model yet derived for financial asset pricing with heterogeneous Cited by: 3. Downloadable. By how much does the presence of behavioral uncertainty in an experimental asset market reduce subjects' confidence in their price forecasts.
An incentivized interval forecast elicitation method is employed to answer this question. Each market consists of six traders, and the value of dividends is known. Two treatments are considered: six human traders (6H), and one human Cited by: 2.
The price impact of irrational traders does not rely on their long‐run survival, and they can have a significant impact on asset prices even when their wealth becomes negligible.
We also show that irrational traders' portfolio policies can deviate from their. In section 3, we specialize our model to the case in which traders are risk-neutral and face limits on their asset positions.
Absent risk premia, noisy information aggregation is then the only force shaping asset prices and returns. Using a market structure rst introduced in Hellwig, Mukherji. In this paper we analyze a dynamic, asset pricing model where an arbitrary number of heterogeneous, procedurally rational investors divide their wealth between two assets.
Both fundamental dividend process and behavior of traders are modeled in a very general way. In particular, agents’ choices are described by means of the generic smooth. Heterogeneous behaviour in European stock market indices Author: J.A.N. de Groot dividend announcements was a first taste of human behaviour in the market.
This thesis goes one step human behaviour with heterogeneous agents models. This within the sight of validation of the scope of. on the impact of noise from uninformed traders on the quot-ing behaviour of a market maker trained with reinforcement learning. Abernethy and Kale  used an online learn-ing approach.
Spooner et al.  later explored the use of reinforcement learning to train inventory-sensitive marketAuthor: Thomas Spooner, Rahul Savani. What is market presence. and conditional heteroscedasticity in asset returns' 'Asset market behaviour in the presence of heterogeneous traders' 'Modelling the demand for M4 in the UK'.
Asset Markets Economics Cash to Asset Ratio One factor that seems to a ect asset market bubbles is the amount of free cash available (relative to assets) Caginalp et al.
() vary initial amounts of cash in asset markets. Find that each unit of additional cash per share, adds (on average) $1 to the maximum price reached by the asset!File Size: KB.
Heterogeneous expectations leading to bubbles and crashes in asset markets: Tipping point, herding behavior and group effect in an agent-based model Sunyoung Lee and Keun Lee* * Correspondence: [email protected] An earlier version of this paper was presented at the 25th Annual EAEPE Conference which was held in Paris from 7 to 9 November Cited by: 9.
CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules.
Agents are assumed to have three components to the expectation of future asset returns, namely-fundamentalist, chartist and noise trader.
Asset Price Dynamics with Heterogeneous Beliefs and Time Delays Kai Li Finance Discipline Group, UTS Business School ining their impact on various types of market behaviors such as price deviations from the fundamental values, excess volatility, and spill-over eﬀect, which are then explored to (, ) develop an asset pricing.
in equilibrium, following from the presence of heterogeneous rational investors subject to position limits. 2 Irrespective of whether or not noise traders are present in actual ﬁnancial markets, our viewpoint is that there may exist diﬀerent categories of rational market participants (e.g.
This behavior appears inconsistent with conventional models of the risk premia. On the other hand, this behavior could arise from the presence of some traders in the market who have "regressive expectations" or from anticipated shifts in the distribution of asset prices inducing a "peso problem".Cited by: 8.
Models of ﬁnancial markets as aggregates of dynamic heterogeneous adaptive agents faithfully replicate a large range of important stylized facts, and also offer us new insights into the under-lying behavior behind asset price movements.
This paper presents a new market. Behavioral Capital Asset Pricing Theory - Volume 29 Issue 3 - Hersh Shefrin, Meir Statman This paper develops a capital asset pricing theory in a market where noise traders interact with information traders.
The paper derives a necessary and sufficient condition for the existence of price efficiency in the presence of noise traders and Cited by: The risk-free asset is defined as an asset for which there is uncertainty regarding the expected rate of return. The standard deviation of return for the risk-free asset is equal to zero.
The standard deviation of return for the risk-free asset cannot be zero, since division by zero is undefined. Choices a and b. Choices a and c.
Stock Market Trading Volume Andrew W. Lo and Jiang Wang First Draft: September 5, Abstract If price and quantity are the fundamental building blocks of any theory of market interac-tions, the importance of trading volume in understanding the behavior of nancial markets is by: Huang and Santos we model an economy with heterogeneous agents, incomplete markets and idiosyncratic income shocks.
In a complete market, representative-agent model, individuals completely insure the id-iosyncratic shocks to their income and individual consumption is perfectly correlated with the aggregate per capita by: 1. Downloadable (with restrictions). This paper studies herd behavior, bubbles and social interactions in financial markets through the asset pricing models with heterogeneous interacting agents.
The relationship between social interactions, herd behavior and bubbles is examined. It is found that herd behavior arises naturally when there are strong enough social interactions among individual.
On the other hand, the contribution of the paper of  is to formulate an agent based model with a multi-asset framework when investors’ trading exhibits the disposition effect.
The artificial financial market is populated with traders following two heterogeneous trading strategies: the technical and the fundamental trading : Hermes Yukio Higachi, Ana Cristina Cruz de Faria, Adriana Sbicca, Jefferson Kato.
mark et and beha viour of heterogeneous traders is a crucial issue in the w orking actual mark ets as it a ects imp ortan t v ariables suc h as the olume of trade, degree liquidit y and transac-tion costs, price v olatilit y and information pro cessing.
Heterogeneit ma concern risk a v ersion, needs for liquidit y, asset preferences, b eliefs. A Heterogeneous Market G If consumers are homogeneous, and only a single price can be charged, then finding the best price that maximizes the sellers profit it is the best the firm can do.
G If consumers differ in their willingness to pay, then the profit-maximizing firm can increase its profits by charging a variety of prices, that is, byFile Size: 95KB. market efficiency by showing how trend-chasing feedback traders can affect equilibrium prices.
While there is no single measure of expected returns if markets are comprised of heterogeneous traders, the realized return will systematically deviate from the return based upon the true value of the asset.
The traders in the stock market are important as they essentially control the share price which is determined by share holders. The traders can often influence the market with their purchasing decisions as .Heterogeneous expectations leading to bubbles and crashes in asset markets: tipping point, herding behavior and group effect in an agent-based model Sunyoung Lee and Keun Lee* * Correspondence: [email protected] This paper was presented at the 25th Annual EAEPE Conference which was held at Paris from 7 to 9 November Department of Cited by: 9.Market forecasts are irrational: This irrationality may arise from the presence of heterogeneous traders in the market.
Heterogeneity among traders means that there are different types of traders such as fundamentalists (they keep an eye on macroeconomic conditions that affect exchange rates), chartists (they use charts or graphs about past.