Traditional finance is built on the rationality paradigm. This chapter discusses simple models from an alternative approach in which financial markets are viewed as complex evolutionary systems. Agents are boundedly rational and base their investment decisions upon market forecasting heuristics. Prices and beliefs about future prices co-evolve over time with mutual feedback. Strategy choice is driven by evolutionary selection, so that agents tend to adopt strategies that were successful in the past. Calibration of "simple complexity models" with heterogeneous expectations to real financial market data and laboratory experiments with human subjects are also discussed.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number
08-05.
Length: Date of creation: 2008 Date of revision: Handle: RePEc:ams:ndfwpp:08-05
Contact details of provider: Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands Phone: + 31 20 525 52 58 Fax: + 31 20 525 52 83 Web page: http://www.fee.uva.nl/cendef/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Cees C.G. Diks).