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Agent-based model with heterogeneous fundamental prices

Author

Listed:
  • Ferreira, Fernando F.
  • de Oliveira, Viviane M.
  • Crepaldi, Antônio F.
  • Campos, Paulo R.A.

Abstract

In this paper, we investigate the properties of the return time series generated by a multi-agent-based model for financial markets. Our model is a variant of the grand canonical minority game model where the agents behave as producers and a fraction of them is allowed to shift their strategy in order to act opportunistically as fundamentalists. Our model assumes the existence of speculators with heterogeneous beliefs about the fundamental price. Our simulation results are robust to reproduce stylized facts as volatility clustering, fat tail, uncorrelated return and slowing decay on the absolute return.

Suggested Citation

  • Ferreira, Fernando F. & de Oliveira, Viviane M. & Crepaldi, Antônio F. & Campos, Paulo R.A., 2005. "Agent-based model with heterogeneous fundamental prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 357(3), pages 534-542.
  • Handle: RePEc:eee:phsmap:v:357:y:2005:i:3:p:534-542
    DOI: 10.1016/j.physa.2005.03.048
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    References listed on IDEAS

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    1. Johnson, Neil F. & Jefferies, Paul & Hui, Pak Ming, 2003. "Financial Market Complexity," OUP Catalogue, Oxford University Press, number 9780198526650.
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    Citations

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    Cited by:

    1. Ling-Yun He, 2010. "Is Price Behavior Scaling and Multiscaling in a Dealer Market? Perspectives from Multi-Agent Based Experiments," Computational Economics, Springer;Society for Computational Economics, vol. 36(3), pages 263-282, October.
    2. Kiniwa, Jun & Koide, Takeshi & Sandoh, Hiroaki, 2009. "Analysis of price behavior in lazy $-game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(18), pages 3879-3891.
    3. Ahmad Naimzada & Giorgio Ricchiuti, 2006. "Heterogeneous Fundamentalists and Imitative Processes," Working Papers 104, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
    4. Lustosa, Bernardo C. & Cajueiro, Daniel O., 2010. "Constrained information minority game: How was the night at El Farol?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(6), pages 1230-1238.
    5. Tilles, Paulo F.C. & Ferreira, Fernando F. & Francisco, Gerson & Pereira, Carlos de B. & Sarti, Flavia M., 2011. "A Markovian model market—Akerlof’s lemons and the asymmetry of information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(13), pages 2562-2570.
    6. Kukacka, Jiri & Barunik, Jozef, 2013. "Behavioural breaks in the heterogeneous agent model: The impact of herding, overconfidence, and market sentiment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(23), pages 5920-5938.
    7. Mello, Bernardo A. & Cajueiro, Daniel O., 2008. "Minority games, diversity, cooperativity and the concept of intelligence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(2), pages 557-566.

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