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Estimation of an Adaptive Stock Market Model with Heterogeneous Agents

  • Henrik Amilon
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    Standard economic models based on rational expectations and homogeneity have problems to explain the complex and volitile nature of financial markets. Recently, boundedly rational and heterogeneous agents models have been developed, and simulated returns are found to exhibit various stylized facts, such as volatility clustering and fat tails. Here, we estimate a simple version of such a model by the use of efficient method of moments, and compare the results to real data and traditional econometric models. We find that the model generates returns with properties similar to observed data, but that the fit generally is poor.

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    File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp107.pdf
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    Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 107.

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    Date of creation: 01 Sep 2003
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    Handle: RePEc:uts:rpaper:107
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