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Avoiding regret in an agent-based asset pricing model

Radu T. Pruna, Maria Polukarov and Nicholas R. Jennings

Finance Research Letters, 2018, vol. 24, issue C, 273-277

Abstract: We use an agent-based asset pricing model to test the implications of the disposition effect (avoiding regret) on investors’ interactions and price settings. We show that it has a direct impact on the returns series produced by the model, altering important stylized facts such as its heavy tails and volatility clustering. Moreover, we show that the horizon over which investors compute their wealth has no effect on the dynamics produced by the model.

Keywords: Agent-based model; Asset pricing; Disposition effect; Behavioural bias (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 G41 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:273-277