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Equilibrium Return and Agents’ Survival in a Multiperiod Asset Market: Analytic Support of a Simulation Model

In: Advances in Artificial Economics

Author

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  • Mikhail Anufriev

    (University of Amsterdam)

  • Pietro Dindo

    (University of Amsterdam)

Abstract

We provide explanations for the results of the Levy, Levy and Solomon model, a recent simulation model of financial markets. These explanations are based upon mathematical analysis of a dynamic model of a market with an arbitrary number of heterogeneous investors allocating their wealth between two assets. The investors’ choices are endogenously modeled in a general way and, in particular, consistent with the maximization of an expected utility. We characterize the equilibria of the model and their stability and discuss implications for the market return and agents’ survival. These implications are in agreement with the results of previous simulations. Thus, our analytic approach allows to explore the robustness of the previous analysis and to expand its spectrum.

Suggested Citation

  • Mikhail Anufriev & Pietro Dindo, 2006. "Equilibrium Return and Agents’ Survival in a Multiperiod Asset Market: Analytic Support of a Simulation Model," Lecture Notes in Economics and Mathematical Systems, in: Charlotte Bruun (ed.), Advances in Artificial Economics, chapter 19, pages 269-282, Springer.
    • Handle: RePEc:spr:lnechp:978-3-540-37249-3_19
    DOI: 10.1007/3-540-37249-0_19
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    Cited by:

    1. Anufriev, Mikhail & Dindo, Pietro, 2010. "Wealth-driven selection in a financial market with heterogeneous agents," Journal of Economic Behavior & Organization, Elsevier, vol. 73(3), pages 327-358, March.

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