Empirical validation of stochastic models of interacting agents

Simone Alfarano, Thomas Lux and F. Wagner

The European Physical Journal B: Condensed Matter and Complex Systems, 2007, vol. 55, issue 2, 183-187

Abstract: The present paper expands on recent attempts at estimating the parameters of simple interacting-agent models of financial markets [S. Alfarano, T. Lux, F. Wagner, Computational Economics 26, 19 (2005); S. Alfarano, T. Lux, F. Wagner, in Funktionsfähigkeit und Stabilität von Finanzmärkten, edited by W. Franz, H. Ramser, M. Stadler (Mohr Siebeck, Tübingen, 2005), pp. 241–254]. Here we provide additional evidence by (i) investigating a large sample of individual stocks from the Tokyo Stock Exchange, and (ii) comparing results from the baseline noise trader/fundamentalist model of [S. Alfarano, T. Lux, F. Wagner, Computational Economics 26, 19 (2005)] with those obtained from an even simpler version with a preponderance of noise trader behaviour. As it turns out, this somewhat more parsimonious “maximally skewed” variant is often not rejected in favor of the more complex version. We also find that all stocks are dominated by noise trader behaviour irrespective of whether the data prefer the skewed or the baseline version of our model. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2007

Keywords: 89.65.Gh Economics; econophysics, financial markets, business and management, (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (22)

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DOI: 10.1140/epjb/e2006-00385-4

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