Related papers: From Bias to Behavior: Learning Bull-Bear Market D…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
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…
Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance…
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,…
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…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link…
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…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
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…
Human decision-making in real-life deviates significantly from the optimal decisions made by fully rational agents, primarily due to computational limitations or psychological biases. While existing studies in behavioral finance have…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
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…
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by incorporating investor behavior within the framework of…
The high-order complexity of human behaviour is likely the root cause of extreme difficulty in financial market projections. We consider that behavioural simulation can unveil systemic dynamics to support analysis. Simulating diverse human…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
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…