Modelling an artificial stock market: When cognitive institutions influence market dynamics
AbstractThe paper presents an artificial financial market designed to analyse market dynamics from the behaviour of investors. The model especially allows highlighting the role of a particular kind of institution in the orientation of market dynamics. The information – delivered by financial intermediaries as rating agencies and considered as a cognitive institution – directs the decisions of investors who are heterogeneous agents endowed with capabilities of learning in a changing environment. We demonstrate that the cognitive institution influences market dynamics as it allows the co-ordination of the decisions of investment in the same direction. The information delivered by rating agencies is clearly a « focal point » for investors and contributes to generate a speculative dynamic on the market.
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Bibliographic InfoPaper provided by Groupement de Recherches Economiques et Sociales in its series Cahiers du GRES with number 2004-04.
Date of creation: 2004
Date of revision:
artificial model; financial market; investors; cognitive institution; information; interactions; co-ordination; learning; speculative dynamic.;
Find related papers by JEL classification:
- B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-23 (All new papers)
- NEP-CBE-2004-02-23 (Cognitive & Behavioural Economics)
- NEP-CMP-2004-02-23 (Computational Economics)
- NEP-FIN-2004-02-23 (Finance)
- NEP-FMK-2004-02-23 (Financial Markets)
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