Learning to forecast, risk aversion, and microstructural aspects of financial stability

Alessio Emanuele Biondo

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2018, vol. 12, No 2018-20, 21 pages

Abstract: This paper presents a simulative model of a financial market, based on a fully operating order book with limit and market orders. The heterogeneity of traders is characterized not only with regards to their trading rules, but also by introducing a behavioral individual risk aversion and a learning ability influencing the process of expectations formation. Results show that individual learning may play a role in stabilizing the aggregate market dynamics, whereas the risk aversion has, counterintuitively, the opposite effect.

Keywords: order book; learning to forecast; risk aversion; agent-based models (search for similar items in EconPapers)
JEL-codes: C63 E44 E47 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201820

DOI: 10.5018/economics-ejournal.ja.2018-20

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