Equilibrium return and agents' survival in a multiperiod asset market: Analytic support of a simulation model

Publisher:
Springer
Publication Type:
Chapter
Citation:
Advances in artificial economics: The economy as a complex dynamic system, 2006, 1st, pp. 269 - 282
Issue Date:
2006-01
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We provide explanations for the results of the Levy, Levy and Solomon model, a recent simulation model of financial markets. These explanations are based upon mathematical analysis of a dynamic model of a market with an arbitrary number of heterogeneous investors allocating their wealth between two assets. The investors choices are endogenously modeled in a general way and, in particular, consistent with the maximization of an expected utility. We characterize the equilibria of the model and their stability and discuss implications for the market return and agents survival. These implications are in agreement with the results of previous simulations. Thus, our analytic approach allows to explore the robustness of the previous analysis and to expand its spectrum.
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