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

Content Provider	Springer Nature Link
Author	Chen, Shu Peng He, Ling Yun
Copyright Year	2012
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.
Starting Page	267
Ending Page	289
Page Count	23
File Format	PDF
ISSN	09277099
Journal	Computational Economics
Volume Number	42
Issue Number	3
e-ISSN	15729974
Language	English
Publisher	Springer US
Publisher Date	2012-11-27
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Financial bubble Traders’ heterogeneity Multi-agent simulations Economic Theory
Content Type	Text
Resource Type	Article
Subject	Economics, Econometrics and Finance Computer Science Applications

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
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3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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