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Author: Publisher: ISBN: Category : Languages : en Pages :
Book Description
Financial time series have been shown to exhibit market regularities, so-called stylized facts, which have challenged the rational expectations and efficient market theory. In order to explain those market regularities, behavioral finance economists developed a broad range of agent-based models consisting of agents with heterogeneous expectations on future prices. Agents were not only assumed to have heterogeneous expectations and different trading strategies, they were furthermore assumed to be able to switch between the strategies. The present paper focuses on one particular market regularity, which is volatility clustering of financial time series in the framework of the foreign exchange market. The goal is to explain the phenomenon of volatility clustering from a behavioral finance perspective. In a first step, an overview over common Forex market characteristics is provided, followed by some traditional models of exchange rate determination and the subsequent paradigm shift in the concept of expectations. After having presented the main behavioral explanations on volatility clustering, an agent-based model is introduced, capturing the idea of agent's inertia, as one possible driver of volatility clustering in financial markets. The introduced agent-based model represents an extension of the original model by Frank Westerhoff (2010). The present paper contributes to the behavioral finance literature by enlightening one novel aspect of agent's behavior that may affect price dynamics in financial markets.
Author: Publisher: ISBN: Category : Languages : en Pages :
Book Description
Financial time series have been shown to exhibit market regularities, so-called stylized facts, which have challenged the rational expectations and efficient market theory. In order to explain those market regularities, behavioral finance economists developed a broad range of agent-based models consisting of agents with heterogeneous expectations on future prices. Agents were not only assumed to have heterogeneous expectations and different trading strategies, they were furthermore assumed to be able to switch between the strategies. The present paper focuses on one particular market regularity, which is volatility clustering of financial time series in the framework of the foreign exchange market. The goal is to explain the phenomenon of volatility clustering from a behavioral finance perspective. In a first step, an overview over common Forex market characteristics is provided, followed by some traditional models of exchange rate determination and the subsequent paradigm shift in the concept of expectations. After having presented the main behavioral explanations on volatility clustering, an agent-based model is introduced, capturing the idea of agent's inertia, as one possible driver of volatility clustering in financial markets. The introduced agent-based model represents an extension of the original model by Frank Westerhoff (2010). The present paper contributes to the behavioral finance literature by enlightening one novel aspect of agent's behavior that may affect price dynamics in financial markets.
Author: T. Terano Publisher: Springer Science & Business Media ISBN: 4431713077 Category : Computers Languages : en Pages : 209
Book Description
The chapters of this book are the selected papers from those presented at the Third International Workshop on Agent-Based Approaches in Economic and Social Complex Systems held in Tokyo, Japan in 2005. Articles cover methodological issues, computational model/software, combination with gaming simulation, and real-world applications to economic, management/organizational and social issues.
Author: Gilles Teyssière Publisher: Springer Science & Business Media ISBN: 3540346252 Category : Business & Economics Languages : en Pages : 394
Book Description
Assembles three different strands of long memory analysis: statistical literature on the properties of, and tests for, LRD processes; mathematical literature on the stochastic processes involved; and models from economic theory providing plausible micro foundations for the occurrence of long memory in economics.
Author: Leigh Tesfatsion Publisher: Elsevier ISBN: 0080459870 Category : Business & Economics Languages : en Pages : 905
Book Description
The explosive growth in computational power over the past several decades offers new tools and opportunities for economists. This handbook volume surveys recent research on Agent-based Computational Economics (ACE), the computational study of economic processes modeled as dynamic systems of interacting agents. Empirical referents for "agents" in ACE models can range from individuals or social groups with learning capabilities to physical world features with no cognitive function. Topics covered include: learning; empirical validation; network economics; social dynamics; financial markets; innovation and technological change; organizations; market design; automated markets and trading agents; political economy; social-ecological systems; computational laboratory development; and general methodological issues. *Every volume contains contributions from leading researchers *Each Handbook presents an accurate, self-contained survey of a particular topic *The series provides comprehensive and accessible surveys
Author: Xuezhong He Publisher: ISBN: Category : Languages : en Pages : 45
Book Description
This paper verifies the endogenous mechanism and economic intuition on volatility clustering using the coexistence of two locally stable attractors proposed by Gaunersdorfer, Hommes and Wagener (2008). By considering a simple asset pricing model with two types of boundedly rational traders, fundamentalists and trend followers, and noise traders, we provide conditions on the coexistence of locally stable steady state and invariant cycle of the underlying nonlinear deterministic financial market model and show numerically that the interaction of the coexistence of the deterministic dynamics and noise processes can endogenously generate volatility clustering and long range dependence in volatility observed in financial markets. Economically, volatility clustering occurs when neither the fundamental nor trend following traders dominate the market and when traders switch more often between the two strategies.
Author: Paul De Grauwe Publisher: Princeton University Press ISBN: 0691186995 Category : Business & Economics Languages : en Pages : 213
Book Description
This book provides an alternative view of the workings of foreign exchange markets. The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past. This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend. It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes. Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model. It explains why large exchange-rate changes and volatility clustering occur. It also has important implications for understanding how the news affects the exchange rate. De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate. Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever. The authors also use their model to analyze the effects of official interventions in the foreign exchange market. They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate. They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient. Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics.
Author: Catherine Kyrtsou Publisher: Routledge ISBN: 042958394X Category : Business & Economics Languages : en Pages : 273
Book Description
The book is motivated by the disruptions introduced by the financial crisis and the many attempts that have followed to propose new ideas and remedies. Assembling contributions by authors from a variety of backgrounds, this collection illustrates the potentials resulting from the marriage of financial economics, complexity theory and an out-of-equilibrium view of the economic world. Challenging the traditional hypotheses that lie behind financial market functioning, new evidence is provided about the hidden factors fuelling bubbles, the impact of agents’ heterogeneity, the importance of endogeneity in the information transmission mechanism, the dynamics of herding, the sources of volatility, the portfolio optimization techniques, the financial innovation and the trend identification in a nonlinear time-series framework. Presenting the advances made in financial market analysis, and putting emphasis on nonlinear dynamics, this book suggests interdisciplinary methodologies for the study of well-known stylised facts and financial abnormalities. This book was originally published as a special issue of The European Journal of Finance.
Author: Shu-Heng Chen Publisher: Oxford University Press ISBN: 0199844372 Category : Business & Economics Languages : en Pages : 785
Book Description
The Oxford Handbook of Computational Economics and Finance provides a survey of both the foundations of and recent advances in the frontiers of analysis and action. It is both historically and interdisciplinarily rich and also tightly connected to the rise of digital society. It begins with the conventional view of computational economics, including recent algorithmic development in computing rational expectations, volatility, and general equilibrium. It then moves from traditional computing in economics and finance to recent developments in natural computing, including applications of nature-inspired intelligence, genetic programming, swarm intelligence, and fuzzy logic. Also examined are recent developments of network and agent-based computing in economics. How these approaches are applied is examined in chapters on such subjects as trading robots and automated markets. The last part deals with the epistemology of simulation in its trinity form with the integration of simulation, computation, and dynamics. Distinctive is the focus on natural computationalism and the examination of the implications of intelligent machines for the future of computational economics and finance. Not merely individual robots, but whole integrated systems are extending their "immigration" to the world of Homo sapiens, or symbiogenesis.
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Author: Thomas Lux
Author: T. Terano
Author: Thomas Lux
Author: Gilles Teyssière
Author: Leigh Tesfatsion
Author: Xuezhong He
Author: Paul De Grauwe
Author: Catherine Kyrtsou
Author: Shu-Heng Chen