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Behavior of Investors on a Multi-Asset Market

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  • Steinbacher, Matjaz

Abstract

This paper analyzes the field of investors’ decision-making on a multi-asset market. It does it through a simulation games on a social network framework. It has been demonstrated that more stocks there are in the game and more changing alternatives investors have available to choose from, tougher it is for them to make decisions. Despite in most simulations the safest alternative was dominant, many investors opt for portfolio of the safest and the riskiest stock, by which they back the risk they take with some safe stocks. Non-omniscient investors behave chaotically. In all the cases, liquidity agents proved to be decisive elements of the games, though not always able to deliver the information of all the alternatives when too many alternatives are available.

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File URL: http://mpra.ub.uni-muenchen.de/15898/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15898.

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Date of creation: Jun 2009
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Handle: RePEc:pra:mprapa:15898

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Keywords: social networks; behavioral finance; portfolio analysis; multi-asset game; chaos;

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References

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  1. Steinbacher, Matjaz, 2009. "The Role of Liquidity Individuals in the Decision-Making," MPRA Paper 13566, University Library of Munich, Germany.
  2. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, American Finance Association, vol. 56(4), pages 1533-1597, 08.
  3. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, American Finance Association, vol. 7(1), pages 77-91, 03.
  5. Bala, V. & Goyal, S., 1995. "Learning from Neighbors," Econometric Institute Research Papers EI 9549-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  6. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  7. Levine, David K. & Pesendorfer, Wolfgang, 2007. "The evolution of cooperation through imitation," Games and Economic Behavior, Elsevier, Elsevier, vol. 58(2), pages 293-315, February.
  8. Steinbacher, Matjaz, 2009. "What is the “value” of value-at-risk in a simulated portfolio decision-making game?," MPRA Paper 13866, University Library of Munich, Germany.
  9. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(3), pages 151-170, Summer.
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