Related papers: On information efficiency and financial stability
Can Large Language Models (AI agents) aggregate dispersed private information through trading and reason about the knowledge of others by observing price movements? We conduct a controlled experiment where AI agents trade in a prediction…
The distribution of efficient individuals in the economy and the efforts that they will put in if they are hired, there are two important concerns for a technologically advanced firm. wants to open a new branch. The firm does not have…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
We focus on the influence of external sources of information upon financial markets. In particular, we develop a stochastic agent-based market model characterized by a certain herding behavior as well as allowing traders to be influenced by…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and…
A seller offers an asset in a decentralised market. Buyers have private signals about their common value. I study whether the market becomes allocatively more efficient with (i) more buyers, (ii) better-informed buyers. Both increase the…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
We study the effects of introducing information inefficiency in a model for a random linear economy with a representative consumer. This is done by considering statistical, instead of classical, economic general equilibria. Employing two…
Since the 1960s, the question whether markets are efficient or not is controversially discussed. One reason for the difficulty to overcome the controversy is the lack of a universal, but also precise, quantitative definition of efficiency…
Adaptive networks consist of a collection of agents with adaptation and learning abilities. The agents interact with each other on a local level and diffuse information across the network through their collaborations. In this work, we…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
The ability of a society to make the right decisions on relevant matters relies on its capability to properly aggregate the noisy information spread across the individuals it is made of. In this paper we study the information aggregation…
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 introduce a minimal Agent Based Model for financial markets to understand the nature and Self-Organization of the Stylized Facts. The model is minimal in the sense that we try to identify the essential ingredients to reproduce the main…
We consider a network of interacting agents and we model the process of choice on the adoption of a given innovative product by means of statistical-mechanics tools. The modelization allows us to focus on the effects of direct interactions…