Risk preference and stability under learning

Christophre Georges ()

Economics Letters, 2015, vol. 132, issue C, 105-108

Abstract: We consider a simple market environment in which traders with finite memory update forecasting rules at random intervals by OLS. In this context, changes in the perception of market risk can trigger volatility and bubbles. Consequently, higher degrees of risk response among traders can have a destabilizing effect on price dynamics. We consider the interaction of this effect with memory, the speed of learning, and the nature of the forecasting rules.

Keywords: Learning; Expectations; Agent-based modeling (search for similar items in EconPapers)
JEL-codes: D83 D84 E44 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:132:y:2015:i:c:p:105-108

DOI: 10.1016/j.econlet.2015.04.029

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