Smart Agents and Sentiment in the Heterogeneous Agent Model
In this paper we extend the original heterogeneous agent model by introducing smart traders and changes in agents' sentiment. The idea of smart traders is based on the endeavor of market agents to estimate future price movements. By adding smart traders and changes in sentiment we try to improve the original heterogeneous agents model so that it provides a closer description of real markets. The main result of the simulations is that the probability distribution functions of the price deviations change significantly when smart traders are added to the model, and they also change significantly when changes in sentiment are introduced. We also use the Hurst exponent to measure the persistence of the price deviations and we find that the Hurst exponent is significantly increasing with the number of smart traders in the simulations. This means that the introduction of the smart traders concept into the model results in significantly higher persistence of the simulated price deviations. On the other hand, the introduction of changing sentiment in the proposed form does not change the persistence of the simulated prices significantly.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2009 (2009)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: |
Phone: (02) 24 09 51 11
Fax: (02) 24 22 06 57
Web page: http://www.vse.cz/
More information through EDIRC
|Order Information:|| Postal: Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic|
Web: http://www.vse.cz/pep/ Email:
References listed on IDEAS
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.:
- Brock, W.A. & Hommes, C.H., 1996.
"A Rational Route to Randomness,"
9530r, Wisconsin Madison - Social Systems.
- Brock, William A. & Hommes, Cars H., 1998.
"Heterogeneous beliefs and routes to chaos in a simple asset pricing model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 22(8-9), pages 1235-1274, August.
- Miloslav Vošvrda & Lukáš Vácha, 2002. "Heterogeneous Agent Model And Numerical Analysis Of Learning," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 9(17).
- J. Doyne Farmer & Shareen Joshi, 2000.
"The price dynamics of common trading strategies,"
- Miloslav Vošvrda & Lukáš Vácha, 2003. "Heterogeneous agent model with memory and asset price behaviour," Prague Economic Papers, University of Economics, Prague, vol. 2003(2).
- Chiarella, Carl & He, Xue-Zhong, 2003.
"Heterogeneous Beliefs, Risk, And Learning In A Simple Asset-Pricing Model With A Market Maker,"
Cambridge University Press, vol. 7(04), pages 503-536, September.
- Carl Chiarella & Xue-Zhong He, 2000. "Heterogeneous Beliefs, Risk and Learning in a Simple Asset Pricing Model with a Market Maker," Research Paper Series 35, Quantitative Finance Research Centre, University of Technology, Sydney.
- Lukáš Vácha & Miloslav Vošvrda, 2007. "Wavelet Decomposition of the Financial Market," Prague Economic Papers, University of Economics, Prague, vol. 2007(1), pages 38-54.
- Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
When requesting a correction, please mention this item's handle: RePEc:prg:jnlpep:v:2009:y:2009:i:3:id:350:p:209-219. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vaclav Subrta)
If references are entirely missing, you can add them using this form.