Artificial Long Memory Effects in Two Agend-Based Asset Pricing Models
AbstractThis note is concerned with two recent agent-based models of speculative dynamics from the literature, one by Gaunersdorfer and Hommes and the other by He and Li. At short as well as long lags, both of them display an autocorrelation structure in absolute and squared returns that comes remarkably close to that of real data at a daily frequency. The note argues that these long memory effects are to be ascribed to the stochastic specification of the price equation, which given the wide fluctuations in these models unduly fails to normalize the price shocks. Under an appropriate respecification, the long memory completely disappears. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,15.
Date of creation: 2008
Date of revision:
Volatility clustering; Autocorrelations of returns; Fundamentalists and trendfollowers;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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CeNDEF Working Papers
00-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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"Representativeness of News and Exchange Rate Dynamics,"
CeNDEF Working Papers
02-13, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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