Wealth-driven competition in a speculative financial market: examples with maximizing agents

Mikhail Anufriev

Quantitative Finance, 2008, vol. 8, issue 4, 363-380

Abstract: This paper demonstrates how both the 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 case of optimizing behaviour. The analysis of the asymptotic properties of the market is performed using a geometric approach that 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 analysed. This analysis highlights the features that are specific to linear investment functions. As a consequence, some previous contributions of the agent-based literature are generalized.

Keywords: Asset pricing model; CRRA framework; Equilibrium market curve; Expected utility maximization; Mean-variance optimization; Linear investment functions (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Wealth-Driven Competition in a Speculative Financial Market: Examples With Maximizing Agents (2005)
Working Paper: Wealth-Driven Competition in a Speculative Financial Market: Examples with Maximizing Agents (2005)
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DOI: 10.1080/14697680701494534

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