Stylized facts from a threshold-based heterogeneous agent model

R. Cross, M. Grinfeld, H. Lamba, T. Seaman

Research output: Contribution to journalArticle

13 Citations (Scopus)

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.
LanguageEnglish
Pages213-218
Number of pages6
JournalEuropean Physical Journal B - Condensed Matter and Complex Systems
Volume57
Issue number2
DOIs
Publication statusPublished - May 2007

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volatility
kurtosis
thresholds
Switches
decay
simulation

Keywords

  • heterogeneous agent models
  • simulation
  • efficient market hypothesis

Cite this

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Stylized facts from a threshold-based heterogeneous agent model. / Cross, R.; Grinfeld, M.; Lamba, H.; Seaman, T.

In: European Physical Journal B - Condensed Matter and Complex Systems, Vol. 57, No. 2, 05.2007, p. 213-218.

Research output: Contribution to journalArticle

TY - JOUR

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AU - Grinfeld, M.

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AU - Seaman, T.

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