The dynamic behaviour of asset prices in disequilibrium: a survey

Chiarella, C; Dieci, R; He, X

The dynamic behaviour of asset prices in disequilibrium: a survey

Chiarella, C Dieci, R He, X

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Publisher:: InderScience
Publication Type:: Journal Article
Citation:: International Journal of Behavioural Accounting and Finance, 2011, 2 (2), pp. 101 - 139
Issue Date:: 2011-01

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Field	Value	Language
dc.contributor.author	Chiarella, C	en_US
dc.contributor.author	Dieci, R	en_US
dc.contributor.author	He, X https://orcid.org/0000-0003-1446-9996	en_US
dc.date.issued	2011-01	en_US
dc.identifier.citation	International Journal of Behavioural Accounting and Finance, 2011, 2 (2), pp. 101 - 139	en_US
dc.identifier.issn	1753-1969	en_US
dc.identifier.uri	http://hdl.handle.net/10453/17338
dc.description.abstract	This article surveys boundedly rational heterogeneous agent (BRHA) models of financial markets. We give particular emphasis to the role of the market clearing mechanism used, the utility function of the investors, the interaction of price and wealth dynamics, and calibration of this class of models. Due to agents behavioural features and market noise, the BRHA class of models are both non-linear and stochastic. We show that BRHA models produce both a locally stable fundamental equilibrium corresponding to that of the standard paradigm, as well as instability with a consequent rich range of possible complex behaviours that are analysed by both simulation and deterministic bifurcation analysis. A calibrated model is able to reproduce quite well the stylised facts of financial markets. The BRHA framework seems able to better accommodate market features such as fat tails, volatility clustering, large excursions from the fundamental and bubbles than the standard financial market paradigm.	en_US
dc.publisher	InderScience	en_US
dc.relation.ispartof	International Journal of Behavioural Accounting and Finance	en_US
dc.title	The dynamic behaviour of asset prices in disequilibrium: a survey	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1501 Accounting, Auditing and Accountability	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	closed_access
pubs.consider-herdc	true	en_US
pubs.issue	2	en_US
pubs.volume	2	en_US

Abstract:

This article surveys boundedly rational heterogeneous agent (BRHA) models of financial markets. We give particular emphasis to the role of the market clearing mechanism used, the utility function of the investors, the interaction of price and wealth dynamics, and calibration of this class of models. Due to agents behavioural features and market noise, the BRHA class of models are both non-linear and stochastic. We show that BRHA models produce both a locally stable fundamental equilibrium corresponding to that of the standard paradigm, as well as instability with a consequent rich range of possible complex behaviours that are analysed by both simulation and deterministic bifurcation analysis. A calibrated model is able to reproduce quite well the stylised facts of financial markets. The BRHA framework seems able to better accommodate market features such as fat tails, volatility clustering, large excursions from the fundamental and bubbles than the standard financial market paradigm.

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http://hdl.handle.net/10453/17338