Boom-bust dynamics in a stock market participation model with heterogeneous traders

Anna Agliari, Nicolo' Pecora, Ahmad Naimzada

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

6 Citazioni (Scopus)

Abstract

The boundedly rational heterogeneous agent literature can be considered to have properly started with a number of contributions in the early 90s, with the impressive contribution by Carl Chiarella who, amongst his huge field of research, developed several milestone models of heterogeneous interacting agents that are able to generate a number of dynamic outcomes compatible with the empirical evidence. In this paper, we propose a stock market model in which participation depends upon an attractiveness measure related to the market activity and the fundamental value of the market. A market maker adjusts the stock price with respect to the current endogenous excess market demand which, in turn, depends on the demands of the different types of agents populating the economy. Market participants are also allowed to switch between different strategies. Analytical and numerical results confirm how the participation mechanism amplifies the occurrence of endogenous booms and busts, in line with empirical and experimental evidence.
Lingua originaleEnglish
pagine (da-a)458-468
Numero di pagine11
RivistaJOURNAL OF ECONOMIC DYNAMICS & CONTROL
Volume91
DOI
Stato di pubblicazionePubblicato - 2018

Keywords

  • Boom-bust dynamics
  • Evolutive systems
  • Heterogenous traders
  • Stock market participation

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