Related papers: Schizophrenic Representative Investors
Recent advances in the fields of machine learning and neurofinance have yielded new exciting research perspectives in practical inference of behavioural economy in financial markets and microstructure study. We here present the latest…
We examine whether and how granular, real-time predictive models should be integrated into central banks' macroprudential toolkit. First, we develop a tractable framework that formalizes the tradeoff regulators face when choosing between…
Investors usually resort to financial advisors to improve their investment process until the point of complete delegation on investment decisions. Surely, financial advice is potentially a correcting factor in investment decisions but, in…
Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…
A quasi-automatic semigroup is defined by a finite set of generators, a rational (regular) set of representatives, such that if a is a generator or neutral, then the graph of right multiplication by a on the set of representatives is a…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
The prediction of a binary sequence is a classic example of online machine learning. We like to call it the 'stock prediction problem,' viewing the sequence as the price history of a stock that goes up or down one unit at each time step. In…
An artificial agent for financial risk and returns' prediction is built with a modular cognitive system comprised of interconnected recurrent neural networks, such that the agent learns to predict the financial returns, and learns to…
Financial markets provide an ideal frame for studying decision making in crowded environments. Both the amount and accuracy of the data allows to apply tools and concepts coming from physics that studies collective and emergent phenomena or…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
We describe a new model to simulate the dynamic interactions between market price and the decisions of two different kind of traders. They possess spatial mobility allowing to group together to form coalitions. Each coalition follows a…
We consider different levels of complexity which are observed in the empirical investigation of financial time series. We discuss recent empirical and theoretical work showing that statistical properties of financial time series are rather…
Using intraday data for the cross-section of individual stocks, we show that both transitory and persistent fluctuations in realized market and average idiosyncratic volatility, skewness and kurtosis are differentially priced in the…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
We utilize a chartist-fundamentalist model to examine the limits of informationally efficient stock markets. In our model, chartists are permanently active in the stock market, while fundamentalists trade only when their…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
We extend to the multi-asset case the framework of a discrete time model of a single asset financial market developed in Ghoulmie et al (2005). In particular, we focus on adaptive agents with threshold behavior allocating their resources…
This paper presents an agent based model of an electronic market with two types of trading agents. One type follows a mean reverting strategy and the other, the speculative trader, tracks the maximum realised return over recent trades. The…
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and…