Trading heterogeneity under information uncertainty

He, XZ; Zheng, H

Trading heterogeneity under information uncertainty

He, XZ

Zheng, H

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Publication Type:: Journal Article
Citation:: Journal of Economic Behavior and Organization, 2016, 130 pp. 64 - 80
Issue Date:: 2016-10-01

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Field	Value	Language
dc.contributor.author	He, XZ https://orcid.org/0000-0003-1446-9996	en_US
dc.contributor.author	Zheng, H	en_US
dc.date.available	2020-05-25T19:11:50Z
dc.date.issued	2016-10-01	en_US
dc.identifier.citation	Journal of Economic Behavior and Organization, 2016, 130 pp. 64 - 80	en_US
dc.identifier.issn	0167-2681	en_US
dc.identifier.uri	http://hdl.handle.net/10453/122122
dc.description.abstract	© 2016 Elsevier B.V. Instead of heuristical heterogeneity assumption in the current heterogeneous agent models (HAMs), we derive the trading heterogeneity by introducing information uncertainty about the fundamental value to a HAM. Conditional on their private information about the fundamental value, agents choose different trading strategies when optimizing their expected utilities. This provides a micro-foundation to heterogeneity and switching behavior of agents. We show that the HAM with trading heterogeneity originating from the incomplete information performs equally well, if not better than existing HAMs, in generating bubbles, crashes, and mean-reverting prices. The simulated time series matches with the S&P 500 in terms of power law distribution in returns, volatility clustering and long memory in volatility.	en_US
dc.relation	http://purl.org/au-research/grants/arc/DP130103210
dc.relation	http://purl.org/au-research/grants/arc/DP110104487
dc.relation	http://purl.org/au-research/grants/arc/DP0450526
dc.relation	http://purl.org/au-research/grants/arc/DP0773776
dc.relation.ispartof	Journal of Economic Behavior and Organization	en_US
dc.relation.isbasedon	10.1016/j.jebo.2016.07.001	en_US
dc.subject.classification	Economics	en_US
dc.title	Trading heterogeneity under information uncertainty	en_US
dc.type	Journal Article
utslib.citation.volume	130	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1403 Econometrics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.publication-status	Published	en_US
pubs.volume	130	en_US

Abstract:

© 2016 Elsevier B.V. Instead of heuristical heterogeneity assumption in the current heterogeneous agent models (HAMs), we derive the trading heterogeneity by introducing information uncertainty about the fundamental value to a HAM. Conditional on their private information about the fundamental value, agents choose different trading strategies when optimizing their expected utilities. This provides a micro-foundation to heterogeneity and switching behavior of agents. We show that the HAM with trading heterogeneity originating from the incomplete information performs equally well, if not better than existing HAMs, in generating bubbles, crashes, and mean-reverting prices. The simulated time series matches with the S&P 500 in terms of power law distribution in returns, volatility clustering and long memory in volatility.

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http://hdl.handle.net/10453/122122