Neues BERG Working Paper Nr. 160 von Noemi Schmitt, Ivonne Schwartz und Frank Westerhoff erschienen!

In der BERG Working Paper Series wurde von Noemi Schmitt, Ivonne Schwartz und Frank Westerhoff ein neues Papier mit dem Titel „Heterogeneous speculators and stock market dynamics: a simple agent-based computational model“ veröffentlicht.

Eine Gesamtübersicht aller bisher erschienenen BERG Working Paper finden Sie hier.

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Abstract

We propose a simple agent-based computational model in which speculators’ trading behavior may cause bubbles and crashes, excess volatility, serially uncorrelated returns, fat-tailed return distributions and volatility clustering, thereby replicating five important stylized facts of stock markets. Since each speculator bets on his own (technical and fundamental) trading signals, stock prices are excessively volatile and oscillate erratically around their fundamental value. However, speculators’ heterogeneity occasionally vanishes, e.g. due to panic-induced herding behavior, yielding extreme returns. Lasting regimes with high volatility originate from the fact that speculators extract stronger trading signals out of past stock price movements when stock prices fluctuate strongly. Simulations furthermore suggest that circuit breakers may be an effective tool to combat financial market turbulences.