Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89481
Authors: 
Anufriev, Mikhail
Dindo, Pietro
Year of Publication: 
2007
Series/Report no.: 
LEM Working Paper Series 2007/27
Abstract: 
We study the co-evolution of asset prices and individual wealth in a financial market populated by an arbitrary number of heterogeneous, boundedly rational agents. Using wealth dynamics as a selection device we are able to characterize the long run market outcomes, i.e. asset returns and wealth distributions, for a general class of investment behaviors. Our investigation illustrates that market interaction and wealth dynamics pose certain limits on the outcome of agents' interactions even within the wilderness of bounded rationality. As an application we consider the case of heterogeneous mean-variance optimizers and provide insights into the results of the simulation model introduced by Levy, Levy and Solomon (1994).
Subjects: 
Heterogeneous agents
Asset pricing model
Bounded rationality
CRRA framework
Levy-Levy-Solomon model
Evolutionary Finance
JEL: 
G12
D84
C62
Document Type: 
Working Paper

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