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Equilibrium return and agents' survival in a multiperiod asset market: analytic support of a simulation model
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Anufriev, Mikhail and Dindo, Pietro (2007) Equilibrium return and agents' survival in a multiperiod asset market: analytic support of a simulation model. Working Paper. Coventry: Warwick Business School, Financial Econometrics Research Centre. Working papers (Warwick Business School. Financial Econometrics Research Centre) (No.07-).
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Official URL: http://www2.warwick.ac.uk/fac/soc/wbs/research/wfr...
Abstract
We study the co-evolution of asset prices and agents’ wealth in a financial market populated by an arbitrary number of heterogeneous, boundedly rational investors. We model assets’ demand to be proportional to agents’ wealth, so that wealth dynamics can be used as a selection device. For a general class of investment behaviors, we are able to characterize the long run market outcome, i.e. the steady-state equilibrium values of asset return, and agents’ survival. Our investigation illustrates that market forces pose certain limits on the outcome of agents’ interactions even within the “wilderness of bounded rationality”. As an application we show that our analysis provides a rigorous explanation for the results of the simulation model introduced in Levy, Levy, and Solomon (1994).
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Assets (Accounting), Price -- Mathematical models, Rational expectations (Economic theory), Evolutionary economics | ||||
Series Name: | Working papers (Warwick Business School. Financial Econometrics Research Centre) | ||||
Publisher: | Warwick Business School, Financial Econometrics Research Centre | ||||
Place of Publication: | Coventry | ||||
Official Date: | 11 December 2007 | ||||
Dates: |
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Number: | No.07- | ||||
Number of Pages: | 43 | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Funder: | Sixth Framework Programme (European Commission) (FP6) | ||||
Grant number: | FP6-2003-NEST-PATH-1 (SFP), FP6-012410 (SFP) |
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