Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86358
Authors: 
Hommes, Cars
Year of Publication: 
2006
Series/Report no.: 
Tinbergen Institute Discussion Paper 06-029/1
Abstract: 
Interacting agents in finance represent a behavioral, agent-based approach in which financial markets are viewed as complex adaptive systems consisting of many boundedly rational agents interacting through simple heterogeneous investment strategies, constantly adapting their behavior in response to new information, strategy performance and through social interactions. An interacting agent system acts as a noise filter, transforming and amplifying purely random news about economic fundamentals into an aggregate market outcome exhibiting important stylized facts such as unpredictable asset prices and returns, excess volatility, temporary bubbles and sudden crashes, large and persistent trading volume, clustered volatility and long memory.
Subjects: 
heterogeneous agents
behavioral finance
bounded rationality
complexity
JEL: 
G1
E3
D01
D84
Document Type: 
Working Paper

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