WHAT CAUSES PERSISTENCE OF STOCK RETURN VOLATILITY? ONE POSSIBLE EXPLANATION WITH AN ARTIFICIAL STOCK MARKET

Ryuichi Yamamoto ()

New Mathematics and Natural Computation (NMNC), 2006, vol. 02, issue 03, 261-270

Abstract: This paper explores a possible cause of persistence in stock return volatility. Artificial stock markets are examined with different learning mechanisms, i.e. imitative and experiential learning. The simulation result shows that an economy with imitative learning gives rise to persistence of return volatility while an experiential learning economy does not. We find that volatility becomes persistent as investors learn through imitating the prediction methods of others. Imitation is crucial to producing the persistence in stock return volatility.

Keywords: Asset pricing; learning; evolution; volatility clustering (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S1793005706000555

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