Leverage and evolving heterogeneous beliefs in a simple agent-based financial market
No 2018/03, DEM Working Papers from Department of Economics and Management
Recent research has acknowledged the crucial role of financial intermediariesâ€™ balance sheet variables â€“ namely, wealth and leverage â€“ in the dynamics of asset prices. In this paper we use a prototypical â€œsmall-typeâ€ artificial financial market model with heterogeneous interacting traders to pin down how asset prices are affected by the complex interaction between balance sheet constraints and the endogenous evolution of trading rules.
Keywords: Agent-based model; Financial markets; Leverage cycle (search for similar items in EconPapers)
JEL-codes: C63 D53 G12 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-ore
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