Artificial Long Memory Effects in Two Agend-Based Asset Pricing Models

Reiner Franke

No 2008-15, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: This note is concerned with two recent agent-based models of speculative dynamics from the literature, one by Gaunersdorfer and Hommes and the other by He and Li. At short as well as long lags, both of them display an autocorrelation structure in absolute and squared returns that comes remarkably close to that of real data at a daily frequency. The note argues that these long memory effects are to be ascribed to the stochastic specification of the price equation, which given the wide fluctuations in these models unduly fails to normalize the price shocks. Under an appropriate respecification, the long memory completely disappears.

Keywords: Volatility clustering; Autocorrelations of returns; Fundamentalists and trendfollowers (search for similar items in EconPapers)
JEL-codes: C15 D84 G12 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:7368

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