Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246751 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 026.2021
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
We model the learning process of market traders during the unprecedented COVID-19 event. We introduce a behavioral heterogeneous agents' model with bounded rationality by including a correction mechanism through representativeness (Gennaioli et al., 2015). To inspect the market crash induced by the pandemic, we calibrate the STOXX Europe 600 Index, when stock markets suffered from the greatest single-day percentage drop ever. Once the extreme event materializes, agents tend to be more sensitive to all positive and negative news, subsequently moving on to close-to-rational. We find that the deflation mechanism of less representative news seems to disappear after the extreme event.
Subjects: 
Agent-Based Model
Representativeness
Unprecedented Events
JEL: 
G11
G12
G14
C63
Document Type: 
Working Paper

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