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Explaining the Statistical Features of the Spanish Stock Market from the Bottom-Up

In: Advances in Artificial Economics

Author

Listed:
  • José A. Pascual

    (University of Valladolid)

  • J. Pajares

    (University of Valladolid)

  • A. López-Paredes

    (University of Valladolid)

Abstract

In this paper, we use an agent based artificial stock market to explore the relations between the heterogeneity of investors behaviour and the aggregated behaviour of financial markets. In particular, we want to recover the main statistical features of the Spanish Stock Market, as the high levels of kurtosis, excess volatility, non normality of prices and returns, unit roots and volatility clustering. We realise that we cannot catch up most of this features in a market populated only with fundamental investors, so we need to include more heterogeneity in agents behaviour. We include psychological investors who change their risk aversion following the ideas by Kahneman and Tversky (1979) and technical traders who buy or sell depending on crosses of moving averages. The main conclusion is that, in this particular artificial stock market, psychological investors are related to volatility clustering whereas technical trading has more to do with unit roots.

Suggested Citation

  • José A. Pascual & J. Pajares & A. López-Paredes, 2006. "Explaining the Statistical Features of the Spanish Stock Market from the Bottom-Up," Lecture Notes in Economics and Mathematical Systems, in: Charlotte Bruun (ed.), Advances in Artificial Economics, chapter 20, pages 283-294, Springer.
    • Handle: RePEc:spr:lnechp:978-3-540-37249-3_20
    DOI: 10.1007/3-540-37249-0_20
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    Citations

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    Cited by:

    1. Haijun Yang & Shuheng Chen, 2018. "A heterogeneous artificial stock market model can benefit people against another financial crisis," PLOS ONE, Public Library of Science, vol. 13(6), pages 1-25, June.
    2. Haijun Yang & Harry Wang & Gui Sun & Li Wang, 2015. "A comparison of U.S and Chinese financial market microstructure: heterogeneous agent-based multi-asset artificial stock markets approach," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 901-924, November.
    3. Bàrbara Llacay & Gilbert Peffer, 2018. "Using realistic trading strategies in an agent-based stock market model," Computational and Mathematical Organization Theory, Springer, vol. 24(3), pages 308-350, September.

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