Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86740
Authors: 
Hommes, Cars
Wagener, Florian
Year of Publication: 
2008
Series/Report no.: 
Tinbergen Institute Discussion Paper 08-054/1
Abstract: 
Traditional finance is built on the rationality paradigm. This chapter discusses simple models from an alternative approach in which financial markets are viewed as complex evolutionary systems. Agents are boundedly rational and base their investment decisions upon market forecasting heuristics. Prices and beliefs about future prices co-evolve over time with mutual feedback. Strategy choice is driven by evolutionary selection, so that agents tend to adopt strategies that were successful in the past. Calibration of simple complexity models with heterogeneous expectations to real financial market data and laboratory experiments with human subjects are also discussed.
Subjects: 
Asset pricing
heterogeneous beliefs
empirical validation
forecasting experiments
JEL: 
C13
C91
C92
D84
G12
Document Type: 
Working Paper

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