Schizophrenic Representative Investors
Trading and Market Microstructure
2010-04-27 v1 Computational Finance
Abstract
Representative investors whose behaviour is modelled by a deterministic finite automaton generate complexity both in the time series of each asset and in the cross-sectional correlation when the rule governing their behaviour is schizophrenic, meaning the investor must hold multiple seemingly contradictory beliefs simultaneously, either by switching between two different rules at each time step, or computing different responses to different assets.
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Cite
@article{arxiv.1004.4592,
title = {Schizophrenic Representative Investors},
author = {Philip Z. Maymin},
journal= {arXiv preprint arXiv:1004.4592},
year = {2010}
}
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14 pages