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Modelling an artificial stock market: When cognitive institutions influence market dynamics

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  • Stéphanie LAVIGNE (ESC Toulouse and GRES-LEREPS)

Abstract

The paper presents an artificial financial market designed to analyse market dynamics from the behaviour of investors. The model especially allows highlighting the role of a particular kind of institution in the orientation of market dynamics. The information – delivered by financial intermediaries as rating agencies and considered as a cognitive institution – directs the decisions of investors who are heterogeneous agents endowed with capabilities of learning in a changing environment. We demonstrate that the cognitive institution influences market dynamics as it allows the co-ordination of the decisions of investment in the same direction. The information delivered by rating agencies is clearly a « focal point » for investors and contributes to generate a speculative dynamic on the market.

Suggested Citation

  • Stéphanie LAVIGNE (ESC Toulouse and GRES-LEREPS), 2004. "Modelling an artificial stock market: When cognitive institutions influence market dynamics," Cahiers du GRES (2002-2009) 2004-04, Groupement de Recherches Economiques et Sociales.
  • Handle: RePEc:grs:wpegrs:2004-04
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    File URL: http://cahiersdugres.u-bordeaux4.fr/2004/2004-04.pdf
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    Keywords

    artificial model; financial market; investors; cognitive institution; information; interactions; co-ordination; learning; speculative dynamic.;

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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