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Adaptive Beliefs and the Volatility of Asset Prices

Adaptive Beliefs and the Volatility of Asset Prices
Author:
Publisher:
Total Pages:
Release: 2000
Genre:
ISBN:

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I present a simple model of an evolutionary financial market with heterogeneous agents, based on the concept of adaptive belief systems introduced by Brock and Hommes (1997a). Agents choose between different forecast rules based on past performance, resulting in an evolutionary dynamics across predictor choice coupled to the equilibrium dynamics. The model generates endogenous price fluctuations with similar statistical properties as those observed in real return data, such as fat tails and volatility clustering. These similarities are demonstrated for data from the British, German, and Austrian stock market. (author's abstract).


Nonlinear Adaptive Beliefs and the Dynamics of Financial Markets

Nonlinear Adaptive Beliefs and the Dynamics of Financial Markets
Author:
Publisher:
Total Pages:
Release: 2001
Genre:
ISBN:

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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).


Artificial Neural Networks - ICANN 2001

Artificial Neural Networks - ICANN 2001
Author: Georg Dorffner
Publisher: Springer
Total Pages: 1248
Release: 2003-05-15
Genre: Computers
ISBN: 3540446680

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This book is based on the papers presented at the International Conference on Arti?cial Neural Networks, ICANN 2001, from August 21–25, 2001 at the - enna University of Technology, Austria. The conference is organized by the A- trian Research Institute for Arti?cal Intelligence in cooperation with the Pattern Recognition and Image Processing Group and the Center for Computational - telligence at the Vienna University of Technology. The ICANN conferences were initiated in 1991 and have become the major European meeting in the ?eld of neural networks. From about 300 submitted papers, the program committee selected 171 for publication. Each paper has been reviewed by three program committee m- bers/reviewers. We would like to thank all the members of the program comm- tee and the reviewers for their great e?ort in the reviewing process and helping us to set up a scienti?c program of high quality. In addition, we have invited eight speakers; three of their papers are also included in the proceedings. We would like to thank the European Neural Network Society (ENNS) for their support. We acknowledge the ?nancial support of Austrian Airlines, A- trian Science Foundation (FWF) under the contract SFB 010, Austrian Society ̈ for Arti?cial Intelligence (OGAI), Bank Austria, and the Vienna Convention Bureau. We would like to express our sincere thanks to A. Flexer, W. Horn, K. Hraby, F. Leisch, C. Schittenkopf, and A. Weingessel. The conference and the proceedings would not have been possible without their enormous contri- tion.


Heterogeneous Beliefs, Asset Prices, and Volatility in a Pure Exchange Economy

Heterogeneous Beliefs, Asset Prices, and Volatility in a Pure Exchange Economy
Author: Tao Li
Publisher:
Total Pages: 37
Release: 2006
Genre:
ISBN:

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This paper extends the Lucas (1978) model to a setting in which investors have heterogeneous beliefs about the structure of a dividend process. By assuming that all investors have logarithmic preferences and different subjective discount rates, we can obtain a closed-form representation of the stock price. This closed-form solution enables us to analyze the dynamics of the stock price and its volatility. The model can simutaneously generate several well-known empirical facts - excessive volatility, leverage effects, and positive relationships between price and trading volume and between volatility and volume. All of these effects are driven by the different beliefs of investors.


A Behavioral Approach to Asset Pricing

A Behavioral Approach to Asset Pricing
Author: Hersh Shefrin
Publisher: Elsevier
Total Pages: 636
Release: 2008-05-19
Genre: Business & Economics
ISBN: 0080482244

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Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition


Long Memory in Economics

Long Memory in Economics
Author: Gilles Teyssière
Publisher: Springer Science & Business Media
Total Pages: 394
Release: 2006-09-22
Genre: Business & Economics
ISBN: 3540346252

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Assembles three different strands of long memory analysis: statistical literature on the properties of, and tests for, LRD processes; mathematical literature on the stochastic processes involved; and models from economic theory providing plausible micro foundations for the occurrence of long memory in economics.


Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems

Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems
Author: Cars Hommes
Publisher: Cambridge University Press
Total Pages: 273
Release: 2013-01-24
Genre: Business & Economics
ISBN: 1139619780

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Recognising that the economy is a complex system with boundedly rational interacting agents, the book presents a theory of behavioral rationality and heterogeneous expectations in complex economic systems and confronts the nonlinear dynamic models with empirical stylized facts and laboratory experiments. The complexity modeling paradigm has been strongly advocated since the late 1980s by some economists and by multidisciplinary scientists from various fields, such as physics, computer science and biology. More recently the complexity view has also drawn the attention of policy makers, who are faced with complex phenomena, irregular fluctuations and sudden, unpredictable market transitions. The complexity tools - bifurcations, chaos, multiple equilibria - discussed in this book will help students, researchers and policy makers to build more realistic behavioral models with heterogeneous expectations to describe financial market movements and macro-economic fluctuations, in order to better manage crises in a complex global economy.