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We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary…
We present a simple model of a non-equilibrium self-organizing market where asset prices are partially driven by investment decisions of a bounded-rational agent. The agent acts in a stochastic market environment driven by various exogenous…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
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…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
An asymmetric information model is introduced for the situation in which there is a small agent who is more susceptible to the flow of information in the market than the general market participant, and who tries to implement strategies…
We propose that a tree-like hierarchical structure represents a simple and effective way to model the emergent behaviour of financial markets, especially markets where there exists a pronounced intersection between social media influences…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Information that is of relevance for decision-making is often distributed, and held by self-interested agents. Decision markets are well-suited mechanisms to elicit such information and aggregate it into conditional forecasts that can be…
The main aim of this work is to incorporate selected findings from behavioural finance into a Heterogeneous Agent Model using the Brock and Hommes (1998) framework. Behavioural patterns are injected into an asset pricing framework through…
A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
We investigate the financial market dynamics by introducing a heterogeneous agent-based opinion formation model. In this work, we organize the individuals in a financial market by their trading strategy, namely noise traders and…
Urban housing markets, along with markets of other assets, universally exhibit periods of strong price increases followed by sharp corrections. The mechanisms generating such non-linearities are not yet well understood. We develop an…
We present a simple agent-based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism, and vice versa. Our agents invest…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…