A financial market model with confirmation bias

Fabio Tramontana, Alessia Cafferata

Risultato della ricerca: Contributo in rivistaArticolo in rivista

2 Citazioni (Scopus)

Abstract

We develop a financial market model with heterogeneous agents who can be affected by confirmation bias. In particular we consider optimistic and pessimistic agents who adjust their beliefs giving more attention and consideration to evidences supporting their prior beliefs. These kinds of traders coexist with fundamentalists and chartists. We show that this psychological bias makes beliefs more and more distant as time passes, and permits to better explain some important stylized facts of financial markets.
Lingua originaleEnglish
pagine (da-a)252-259
Numero di pagine8
RivistaStructural Change and Economic Dynamics
Stato di pubblicazionePubblicato - 2019

Keywords

  • Financial markets
  • Heterogeneous agents
  • Monte Carlo simulations
  • Piecewise-defined maps

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