Market Dynamics When Agents Anticipate Correlation Breakdown
Joint Authors
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2011, Issue 2011 (31 Dec. 2011), pp.1-33, 33 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2011-10-24
Country of Publication
Egypt
No. of Pages
33
Main Subjects
Abstract EN
The aim of this paper is to analyse the effect introduced in the dynamics of a financial market when agents anticipate the occurrence of a correlation breakdown.
What emerges is that correlation breakdowns can act both as a consequence and as a triggering factor in the emergence of financial crises rational bubbles.
We propose a market with two kinds of agents: speculators and rational investors.
Rational agents use excess demand information to estimate the variance-covariance structure of assets returns, and their investment decisions are represented as a Markowitz optimal portfolio allocation.
Speculators are uninformed agents and form their expectations by imitative behavior, depending on market excess demand.
Several market equilibria result, depending on the prevalence of one of the two types of agents.
Differing from previous results in the literature on the interaction between market dynamics and speculative behavior, rational agents can generate financial crises, even without the speculator contribution.
American Psychological Association (APA)
Falbo, Paolo& Grassi, Rosanna. 2011. Market Dynamics When Agents Anticipate Correlation Breakdown. Discrete Dynamics in Nature and Society،Vol. 2011, no. 2011, pp.1-33.
https://search.emarefa.net/detail/BIM-511554
Modern Language Association (MLA)
Falbo, Paolo& Grassi, Rosanna. Market Dynamics When Agents Anticipate Correlation Breakdown. Discrete Dynamics in Nature and Society No. 2011 (2011), pp.1-33.
https://search.emarefa.net/detail/BIM-511554
American Medical Association (AMA)
Falbo, Paolo& Grassi, Rosanna. Market Dynamics When Agents Anticipate Correlation Breakdown. Discrete Dynamics in Nature and Society. 2011. Vol. 2011, no. 2011, pp.1-33.
https://search.emarefa.net/detail/BIM-511554
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-511554