Bubble Formation and Heterogeneity of Traders : A Multi-Agent Perspective

Content Provider	Semantic Scholar
Author	Chen, Shikuan He, Ling-Yun
Copyright Year	2013
Abstract	Financial bubble is an intensively discussed but quite controversial topic. In current literature, the researches usually focus on the (ir)rationality of traders and its impacts on the bubble. We thereby propose a completely different perspective, that is, of traders’ heterogeneity and its impacts on the formation of bubble in financial markets. As in the real financial markets, the agents are always heterogenous. For example, some of them are fundamentalists, some are chartists, some are noise traders, etc. To model the heterogeneity of agents in the real markets, we proposed a multi-agent model to control the constitution of traders. Based on four scenarios with different constitution of traders’ behaviors, we investigated three extreme situations where the market is occupied by homogeneous agents (no matter they are fundamentalists, chartists or noise traders), and one scenario where the market is made up of heterogeneous traders. By applying Log-Periodic Power-Law (LPPL) model, We studied the impacts of different investors’ behaviors on the bubble formation in the market and found that: (a) the public information has an important influence on the beginning of a bubble; (b) traders’ different expectations and their self-feedback is one of reasons for the existence of log-periodicity in bubble; (c) the existence of power–law growth and log-periodicity, which leads the probability of prediction for the bursting of bubble, is caused by the combined effects of public information, traders’ different expectations and their self-feedback. S.-P. Chen · L.-Y. He Center for Futures and Financial Derivatives, College of Economics and Management, China Agricultural University, Beijing 100083, China e-mail: cspslchen123@163.com L.-Y. He (B) Department of Economics, The University of Calgary, 2500 University Dr. N.W., Calgary, ABT2N 1N4, Canada e-mail: lyhe@ucalgary.ca; lyhe@yahoo.cn
File Format	PDF HTM / HTML
Alternate Webpage(s)	http://www.econ.tuwien.ac.at/lva/compeco.se/artikel/ce_2013_bubble_formation_and_heterogeneity_of_traders_a_multi_agent_perspective.pdf
Language	English
Access Restriction	Open
Subject Keyword	Crash (computing) Dot-com bubble Email Emoticon Entity–relationship model Familial Mediterranean Fever Financial Times Futures and promises Illness Behavior Multi-agent system Numerous Power supply Quasiperiodicity Traders
Content Type	Text
Resource Type	Article