 Direct calibration and comparison of agent-based herding models of financial marketsStudies in Economics from School of Economics, University of Kent Abstract: The present paper aims to test a new model comparison methodology by calibrating and comparing three agent-based models of financial markets on the daily returns of 18 indices. The models chosen for this empirical application are the herding model of Gilli & Winker, its asymmetric version by Alfarano, Lux & Wagner and the more recent model by Franke & Westerhoff, which all share a common lineage to the herding model introduced by Kirman (1993). In addition, standard ARCH processes are included for each financial series to provide a benchmark for the explanatory power of the models. The methodology provides a clear and consistent ranking of the three models. More importantly, it also reveals that the best performing model, Franke & Westerhoff, is generally not distinguishable from an ARCH-type process, suggesting their explanatory power on the data is similar. Keywords: Model selection; agent-based models; herding behaviour (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ukc:ukcedp:1507 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Studies in Economics from School of Economics, University of Kent School of Economics, University of Kent, Canterbury, Kent, CT2 7FS. |
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