A simple agent-based financial market model: Direct interactions and comparisons of trading profits

Frank Westerhoff

No 61, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: We develop an agent-based financial market model in which agents follow technical and fundamental trading rules to determine their speculative investment positions. A central feature of our model is that we consider direct interactions between speculators due to which they may decide to change their trading behavior. For instance, if a technical trader meets a fundamental trader and they realize that fundamental trading has been more profitable than technical trading in the recent past, the probability that the technical trader switches to fundamental trading rules is relatively high. Our simple setup is able to replicate some salient features of asset price dynamics.

Keywords: Agent-based financial market models; direct interactions; evolutionary fitness measures; technical and fundamental analysis; stylized facts of financial markets (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:61

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