Related papers: Adaptive Expectations, Confirmatory Bias, and Info…
The average economic agent is often used to model the dynamics of simple markets, based on the assumption that the dynamics of many agents can be averaged over in time and space. A popular idea that is based on this seemingly intuitive…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
We propose a simple model that describes the dynamics of efficiencies of competing agents. Agents communicate leading to increase of efficiencies of underachievers, and an efficiency of each agent can increase or decrease irrespectively 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…
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
Decisions in organizations are about evaluating alternatives and choosing the one that would best serve organizational goals. To the extent that the evaluation of alternatives could be formulated as a predictive task with appropriate…
Prescriptive business process monitoring provides decision support to process managers on when and how to adapt an ongoing business process to prevent or mitigate an undesired process outcome. We focus on the problem of automatically…
We study a generic model for self-referential behaviour in financial markets, where agents attempt to use some (possibly fictitious) causal correlations between a certain quantitative information and the price itself. This correlation is…
In a unified framework we study equilibrium in the presence of an insider having information on the signal of the firm value, which is naturally connected to the fundamental price of the firm related asset. The fundamental value itself is…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed…
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
Confirmation bias is a cognitive bias that adversely affects management decisions, and mathematical modelling is an aid to its detailed understanding. Bias in opinion update about the value of a parameter is modelled here assuming that…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
We show that it can be suboptimal for Bayesian decision-making agents employing social learning to use correct prior probabilities as their initial beliefs. We consider sequential Bayesian binary hypothesis testing where each individual…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…
When foraging for information, users face a tradeoff between the accuracy and value of the acquired information and the time spent collecting it, a problem which also surfaces when seeking answers to a question posed to a large community.…
Prior work has provided strong evidence that, within organizational settings, teams that bring a diversity of information and perspectives to a task are more effective than teams that do not. If this form of informational diversity confers…
We characterise the solutions to a continuous-time optimal liquidity provision problem in a market populated by informed and uninformed traders. In our model, the asset price exhibits fads -- these are short-term deviations from the…