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What does the financial market pricing do? A simulation analysis with a view to systemic volatility, exuberance and vagary

  • Yuri Biondi
  • Simone Righi

Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory regimes for fundamental information provision, as well as to market confidence conditions among actual and potential investors. Regimes based upon mark-to-market (fair value) measurement of traded security, while generating higher linear correlation between market prices and fundamental signals, also involve higher market instability and volatility. These regimes also incur more relevant episodes of market exuberance and vagary in some regions of the market confidence space, where lower market liquidity further occurs.

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File URL: http://arxiv.org/pdf/1312.7460
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Paper provided by arXiv.org in its series Papers with number 1312.7460.

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Date of creation: Dec 2013
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Handle: RePEc:arx:papers:1312.7460
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  1. Carl Chiarella & Giulia Iori, 2002. "A simulation analysis of the microstructure of double auction markets," Quantitative Finance, Taylor & Francis Journals, vol. 2(5), pages 346-353.
  2. Biondi, Yuri & Giannoccolo, Pierpaolo & Galam, Serge, 2012. "Formation of share market prices under heterogeneous beliefs and common knowledge," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5532-5545.
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  12. Jan Tuinstra & Joep Sonnemans & Cars Hommes & Peter Heemeijer, 2006. "Price Stability and Volatility in Markets with Positive and Negative Expectations Feedback: An Experimental Investigation," Working Papers wp06-18, Warwick Business School, Finance Group.
  13. Biondi Yuri, 2011. "The Pure Logic of Accounting: A Critique of the Fair Value Revolution," Accounting, Economics, and Law, De Gruyter, vol. 1(1), pages 1-49, January.
  14. Stephen F. Le Roy, 2004. "Rational Exuberance," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 783-804, September.
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  18. Aldashev, Gani & Carletti, Timoteo & Righi, Simone, 2011. "Follies subdued: Informational efficiency under adaptive expectations and confirmatory bias," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 110-121.
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