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Market selection with learning and catching up with the Joneses


  • Roman Muraviev


We study the market selection hypothesis in complete financial markets, populated by heterogeneous agents. We allow for a rich structure of heterogeneity: individuals may differ in their beliefs concerning the economy, information and learning mechanism, risk aversion, impatience and 'catching up with Joneses' preferences. We develop new techniques for studying the long-run behavior of such economies, based on the Strassen's functional law of iterated logarithm. In particular, we explicitly determine an agent's survival index and show how the latter depends on the agent's characteristics. We use these results to study the long-run behavior of the equilibrium interest rate and the market price of risk.

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  • Roman Muraviev, 2011. "Market selection with learning and catching up with the Joneses," Papers 1106.3025,, revised Jan 2012.
  • Handle: RePEc:arx:papers:1106.3025

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    References listed on IDEAS

    1. Lux, T. & M. Marchesi, "undated". "Scaling and Criticality in a Stochastic Multi-Agent Model of a Financial Market," Discussion Paper Serie B 438, University of Bonn, Germany, revised Jul 1998.
    2. M. Cristelli & L. Pietronero & A. Zaccaria, 2011. "Critical Overview of Agent-Based Models for Economics," Papers 1101.1847,
    3. Simone Alfarano & Thomas Lux & Friedrich Wagner, 2005. "Estimation of Agent-Based Models: The Case of an Asymmetric Herding Model," Computational Economics, Springer;Society for Computational Economics, vol. 26(1), pages 19-49, August.
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