Resource title

Nonlinear adaptive beliefs and the dynamics of financial markets. The role of the evolutionary fitness measure.

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Resource description

We introduce a simple asset pricing model with two types of adaptively learning traders, fundamentalists and technical traders. Traders update their beliefs according to past performance and to market conditions. The model generates endogenous price fluctuations and captures some stylized facts observed in real returns data, such as excess volatility, fat tails of returns distributions, volatility clustering, and long memory. We show that the results are quite robust w.r.t. to different choices for the performance measure. (author's abstract) ; Series: Report Series SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

Resource author

Andrea Gaunersdorfer, Cars H. Hommes

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Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/434/1/document.pdf

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