Price return autocorrelation and predictability in agent-based models of financial markets

Agent-based models of financial markets

Financial markets are the most widely studied examples of economic systems, both at the empirical and the theoretical level. The study of price, supply and demand in these markets reveals interesting empirical observations whose explanation in the framework of standard equilibrium models is a challenge. Representing a financial market as a system of agents with simple behavioral rules leads to ...

Linking agent-based models and stochastic models of financial markets.

It is well-known that financial asset returns exhibit fat-tailed distributions and long-term memory. These empirical features are the main objectives of modeling efforts using (i) stochastic processes to quantitatively reproduce these features and (ii) agent-based simulations to understand the underlying microscopic interactions. After reviewing selected empirical and theoretical evidence docum...

Financial Economics, Return Predictability and Market Efficiency

Microstructure Dynamics and Agent-Based Financial Markets

One of the essential features of the agent-based financial models is to show how price dynamics is affected by the evolving microstructure. Empirical work on this microstructure dynamics is, however, built upon highly simplified and unrealistic behavioral models of financial agents. Using genetic programming as a rule-inference engine and self-organizing maps as a clustering machine, we are abl...

Agent-Based Approach to Investors' Behavior and Asset Price Fluctuation in Financial Markets

In this paper, we use Agent-Based Approach to analyze how asset prices are affected by investors and investment systems that are based on Behavioral Finance. We build a virtual financial market that contains two types of investors: fundamentalists and non-fundamentalists. As a result of intensive experiments in the market, we find that (1) the traded price agrees with the fundamental value and ...