Heterogeneity of agents, transaction costs and oil price dynamics

Xiaoping Li, Yueqiang Zhao, Chunyang Zhou and Huan Qiu

Applied Economics, 2024, vol. 56, issue 59, 8637-8649

Abstract: In this study, we model the dynamics of oil prices based on a dynamic heterogeneous agent model. Two types of agents including fundamentalists and chartists trade in the market, and the transaction costs are taken into consideration. The empirical results show that it is useful to improve forecasting performance if the model allows the agents to learn from their past performance and considers the transaction costs. Examination of the agents’ dynamic weights shows that fundamentalists and chartists co-existed in the oil market with almost equal weights, and the fundamentalists dominated the market when the oil prices had large deviations from the fundamental level.

Date: 2024
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DOI: 10.1080/00036846.2023.2293086

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