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Non-ergodic Behavior in a Financial Market with Interacting Investors

Listed author(s):
  • Ulrich Horst

    ()

    (University of British Columbia)

  • Jan Wezelburger

We identify possible long-run market shares and the long-run asset price dynamics of financial markets with heterogenous interacting agents. This involves stability conditions for a class of difference equation in a random environment, where the random environment is endogenously generated by agents' investment behavior. Depending on the evaluation of a performance measure of an investment, asset prices may behave in a non-ergodic manner. That is, the price processes converge in distribution, but the limiting distribution is not necessarily uniquely determined. The long-run market shares of two competing financial mediators may strongly depend on the random environment which is endogenously generated by a noise traders

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 229.

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Date of creation: 03 Dec 2006
Handle: RePEc:red:sed006:229
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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