# Simulation of asset pricing in information networks

*Wentao Wang*,
*Junhuan Zhang*,
*Shangmei Zhao* and
*Yanglin Zhang*

*Physica A: Statistical Mechanics and its Applications*, 2019, vol. 513, issue C, 620-634

**Abstract:**
We simulate the asset pricing in the framework of information networks when the number of agents is constant and tends to infinity. When the number of agents is a constant, we find that a higher risk aversion coefficient, a lower information uncertainty, or a higher standard variance of payoff volatility induces a lower asset price; a higher number of agents induces a higher aggregate demand. When the number of agents tends to infinity, we study and simulate the closed form expressions for asset price with risk aversion coefficient. We find that a higher network connectedness or a lower risk aversion coefficient induces a higher information driven volatility component and a lower Sharpe ratio; a higher network connectedness or a lower risk aversion coefficient induces a higher market efficiency. Liquidity driven volatility component, trading profit, price volatility are non-monotonic functions of network connectedness, or risk aversion coefficient.

**Keywords:** Asset pricing; Information networks; Risk aversion; Agent-based simulation (search for similar items in EconPapers)

**Date:** 2019

**References:** View references in EconPapers View complete reference list from CitEc

**Citations** Track citations by RSS feed

**Downloads:** (external link)

http://www.sciencedirect.com/science/article/pii/S0378437118311543

Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

**Related works:**

This item may be available elsewhere in EconPapers: Search for items with the same title.

**Export reference:** BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text

**Persistent link:** https://EconPapers.repec.org/RePEc:eee:phsmap:v:513:y:2019:i:c:p:620-634

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by *K. A. Dawson*, *J. O. Indekeu*, *H.E. Stanley* and *C. Tsallis*

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier

Bibliographic data for series maintained by Dana Niculescu ().