Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129998
Authors: 
Barde, Sylvain
Year of Publication: 
2015
Series/Report no.: 
School of Economics Discussion Papers 1507
Abstract: 
The present paper aims to test a new model comparison methodology by calibrating and comparing three agent-based models of financial markets on the daily returns of 18 indices. The models chosen for this empirical application are the herding model of Gilli & Winker, its asymmetric version by Alfarano, Lux & Wagner and the more recent model by Franke & Westerhoff, which all share a common lineage to the herding model introduced by Kirman (1993). In addition, standard ARCH processes are included for each financial series to provide a benchmark for the explanatory power of the models. The methodology provides a clear and consistent ranking of the three models. More importantly, it also reveals that the best performing model, Franke & Westerhoff, is generally not distinguishable from an ARCH-type process, suggesting their explanatory power on the data is similar.
Subjects: 
model selection
Agent-based models
herding behaviour
JEL: 
C15
C52
G12
Document Type: 
Working Paper

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