Related papers: Intertemporal Substitutability, Risk Aversion and …
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of…
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…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
Imitative and contrarian behaviors are the two typical opposite attitudes of investors in stock markets. We introduce a simple model to investigate their interplay in a stock market where agents can take only two states, bullish or bearish.…
Since exchange economy considerably varies in the market assets, asset prices have become an attractive research area for investigating and modeling ambiguous and uncertain information in today markets. This paper proposes a new generative…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
In theoretical studies, the most commonly used measure of ecological stability is resilience: ecosystems asymptotic rate of return to equilibrium after a pulse-perturbation $-$or shock. A complementary notion of growing popularity is…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
Selecting stock portfolios and assessing their relative volatility risk compared to the market as a whole, market indices, or other portfolios is of great importance to professional fund managers and individual investors alike. Our research…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
This paper describes asset price and return disturbances as result of relations between transactions and multiple kinds of expectations. We show that disturbances of expectations can cause fluctuations of trade volume, price and return. We…
We propose a formula of time-series prediction by means of three states random field Ising model (RFIM). At the economic crisis due to disasters or international disputes, the stock price suddenly drops. The macroscopic phenomena should be…
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…
Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…
This paper investigates the use of risk measures and theories of choice for modeling risk-averse route choice and traffic network equilibrium with random travel times. We interpret the postulates of these theories in the context of routing,…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
Studies of micro-level price datasets find more frequent small price increases than decreases, which can be explained by consumer inattention because time-constrained shoppers might ignore small price changes. Recent empirical studies of…