Wealth-Driven Competition in a Speculative Financial Market: Examples With Maximizing Agents

Mikhail Anufriev

No 05-17, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: This paper demonstrates how both quantitative and qualitative results of a general, analytically tractable asset-pricing model in which heterogeneous agents behave consistently with a constant relative risk aversion assumption can be applied to the special cases of optimizing behavior. The analysis of the asymptotic properties of the market is performed using a geometric approach which allows the visualization of all possible equilibria by means of a simple one-dimensional Equilibrium Market Curve. The case of linear (particularly, mean-variance) investment functions is thoroughly analyzed. This analysis highlights the features which are specific to the linear investment functions. As a consequence, some previous contributions of the agent-based literature are generalized.

Date: 2005
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Related works:
Working Paper: Wealth-Driven Competition in a Speculative Financial Market: Examples with Maximizing Agents (2005)
Journal Article: Wealth-driven competition in a speculative financial market: examples with maximizing agents (2008)
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