Interacting Agents in Finance
AbstractInteracting agents in finance represent a behavioral, agent-based approach in which financial markets are viewed as complex adaptive systems consisting of many boundedly rational agents interacting through simple heterogeneous investment strategies, constantly adapting their behavior in response to new information, strategy performance and through social interactions. An interacting agent system acts as a noise filter, transforming and amplifying purely random news about economic fundamentals into an aggregate market outcome exhibiting important stylized facts such as unpredictable asset prices and returns, excess volatility, temporary bubbles and sudden crashes, large and persistent trading volume, clustered volatility and long memory.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-029/1.
Date of creation: 24 Mar 2006
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Web page: http://www.tinbergen.nl
heterogeneous agents; behavioral finance; bounded rationality; complexity;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-22 (All new papers)
- NEP-CBE-2006-04-22 (Cognitive & Behavioural Economics)
- NEP-FIN-2006-04-22 (Finance)
- NEP-FMK-2006-04-22 (Financial Markets)
- NEP-MAC-2006-04-22 (Macroeconomics)
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