Related papers: Characteristics-driven returns in equilibrium

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…

We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…

We investigate the effects of the social interactions of a finite set of agents on an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by…

The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…

In nature and human societies, the effects of homogeneous and heterogeneous characteristics on the evolution of collective behaviors are quite different from each other. It is of great importance to understand the underlying mechanisms of…

When a linear model is adjusted to control for additional explanatory variables the sign of a fitted coefficient may reverse. Here these reversals are studied using coefficients of determination. The resulting theory can be used to…

A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…

Many economic models feature moment conditions that involve latent variables. When the latent variables are individual fixed effects in an auxiliary panel data regression, we construct orthogonal moments that eliminate first-order bias…

We introduce a non linear pricing model of individual stock returns that defines a stickiness parameter of the returns. The pricing model resembles the capital asset pricing model used in finance but has a non linear component inspired from…

Financial firms and institutional investors are routinely evaluated based on their performance relative to their peers. These relative performance concerns significantly influence risk-taking behavior and market dynamics. While the…

This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…

Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data.…

Effective demand forecasting is critical for inventory management, production planning, and decision making across industries. Selecting the appropriate model and suitable features to efficiently capture patterns in the data is one of the…

In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…

In Part II of this paper, we concentrate our analysis on the price dynamical model with the moving average rules developed in Part I of this paper. By decomposing the excessive demand function, we reveal that it is the interplay between…

Internet platforms' traffic defines important characteristics of platforms, such as pricing of services, advertisements, speed of operations. One can estimate the traffic with the traditional time series models like ARIMA, Holt-Winters,…

Factor modeling of asset returns has been a dominant practice in investment science since the introduction of the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). The factors, which account for the systematic risk,…

We are looking for the agent-based treatment of the financial markets considering necessity to build bridges between microscopic, agent based, and macroscopic, phenomenological modeling. The acknowledgment that agent-based modeling…

We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…

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…