NDLI: Asset Price Dynamics When Behavioural Heterogeneity Varies

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Asset Price Dynamics When Behavioural Heterogeneity Varies

Content Provider	Semantic Scholar
Author	Colucci, Domenico Valori, Vincenzo
Copyright Year	2008
Abstract	We build a model in which asset prices are expectationally driven and agents forecast future prices hinging on a combination of fundamental value, trend and inertia. The model has a unique steady state and we investigate its stability. In particular the amount of behavioural heterogeneity in the model is given by the number of intermediaries actually operating in the market: we are concerned with the effects that changing such number produces on the steady state in terms of stability. Assuming that the set of relevant intermediaries is sampled randomly we discuss the probability of having stability as a function of the market's parameters and the number of such agents. Our simulations show that stability in the multi-agent setting does not require that conditions for stability in the representative agent case be met for every individual; so stability can arise even if some of the agents would not be compatible with it if they were the only ones operating in the market. The same goes for instability. Further, we find that stabilising (or destabilising) effects of heterogeneity are not uniform across the market's essential characteristics, as captured by a given structural parameter: in fact we can identify a parametric region in which heterogeneity is stabilising and another in which it is destabilising.
Starting Page	3
Ending Page	20
Page Count	18
File Format	PDF HTM / HTML
DOI	10.1007/s10614-008-9129-3
Volume Number	32
Alternate Webpage(s)	https://www.disei.unifi.it/upload/sub/pubblicazioni/repec/flo/workingpapers/storicodimad/2006/dimadwp2006-01.pdf
Alternate Webpage(s)	https://doi.org/10.1007/s10614-008-9129-3
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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