Complexity, Evolution and Learning: a simple story of heterogeneous expectations and some empirical and experimental validation
This note discusses complexity models in economics. A key feature of these models is that agents have heterogeneous expectations, disciplined by adaptive learning and evolutionary selection. Agents adapt their rules based upon past observations and switch between different forecasting heuristics based upon strategy performance. We discuss how these models match empirical facts as well as laboratory experiments with human subjects and how this approach may tame the ``wilderness of bounded rationality''.
|Date of creation:||2007|
|Contact details of provider:|| Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands|
Phone: + 31 20 525 52 58
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Web page: http://www.fee.uva.nl/cendef/
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- 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.
- Brock, W.A. & Hommes, C.H., 1996. "Hetergeneous Beliefs and Routes to Chaos in a Simple Asset Pricing Model," Working papers 9621, Wisconsin Madison - Social Systems.
- William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
- Brock, W.A., 1995. "A Rational Route to Randomness," Working papers 9530, Wisconsin Madison - Social Systems.
- Brock, W.A. & Hommes, C.H., 1996. "A Rational Route to Randomness," Working papers 9530r, Wisconsin Madison - Social Systems.
- Eugene F. Fama & Kenneth R. French, 2002. "The Equity Premium," Journal of Finance, American Finance Association, vol. 57(2), pages 637-659, 04.
- Eugene Fama & F. & Kenneth R. French, "undated". "The Equity Premium."," CRSP working papers 522, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Tesfatsion, Leigh & Judd, Kenneth L., 2006. "Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics," Staff General Research Papers Archive 10368, Iowa State University, Department of Economics.
- Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
- Arthur, W.B. & Holland, J.H. & LeBaron, B. & Palmer, R. & Tayler, P., 1996. "Asset Pricing Under Endogenous Expectations in an Artificial Stock Market," Working papers 9625, Wisconsin Madison - Social Systems.
- W. Brian Arthur & John H. Holland & Blake LeBaron & Richard Palmer & Paul Taylor, 1996. "Asset Pricing Under Endogenous Expectation in an Artificial Stock Market," Working Papers 96-12-093, Santa Fe Institute.
- Cars Hommes & Joep Sonnemans & Jan Tuinstra & Henk van de Velden, 2005. "Coordination of Expectations in Asset Pricing Experiments," Review of Financial Studies, Society for Financial Studies, vol. 18(3), pages 955-980.
- Cars Hommes & Joep Sonnemans & Jan Tuinstra & Henk van de Velden, 2003. "Coordination of Expectations in Asset Pricing Experiments," Tinbergen Institute Discussion Papers 03-010/1, Tinbergen Institute.
- Cars Hommes & Joep Sonnemans & Jan Tuinstra & Henk van de Velden, 2004. "Coordination of Expectations in Asset Pricing Experiments," DNB Staff Reports (discontinued) 119, Netherlands Central Bank.
- LeBaron, Blake & Arthur, W. Brian & Palmer, Richard, 1999. "Time series properties of an artificial stock market," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1487-1516, September.
- Arthur, W.B. & LeBaron, B. & Palmer, R., 1997. "Time Series Properties of an Artificial Stock Market," Working papers 9725, Wisconsin Madison - Social Systems.
- 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.
- Cars H. Hommes, 2005. "Heterogeneous Agent Models in Economics and Finance," Tinbergen Institute Discussion Papers 05-056/1, Tinbergen Institute.
- Anufriev, M. & Hommes, C.H., 2007. "Evolution of Market Heuristics," CeNDEF Working Papers 07-06, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. Full references (including those not matched with items on IDEAS)
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