Computational Economics

, Volume 22, Issue 2, pp 213–223

Asset Price Dynamics among Heterogeneous Interacting Agents

  • Carl Chiarella
  • Mauro Gallegati
  • Roberto Leombruni
  • Antonio Palestrini
Article

DOI: 10.1023/A:1026137931041

Cite this article as:
Chiarella, C., Gallegati, M., Leombruni, R. et al. Computational Economics (2003) 22: 213. doi:10.1023/A:1026137931041

Abstract

In this paper, we investigate the presence of rationalherding on asset price dynamics during the intra-day trading withheterogeneous interacting agents, whose information set is notcomplete. In the model, individual probability measures offinancial investment strategies are defined using statisticalmechanics concepts. In addition, there is a learning processtoward the best strategy, implemented as a geneticalgorithm. Simulations show that imitative behavior can be arational strategy, since it allows an investor to gain excessreturns on an asset by exploiting information regarding pricedynamics not strictly contained in the fundamental solution. Herdbehavior is rational in the sense that it produces profits at theexpense of increasing the complexity of the system.

asset price dynamicsrational herdinggeneticalgorithms

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Carl Chiarella
    • 1
  • Mauro Gallegati
    • 2
  • Roberto Leombruni
    • 3
  • Antonio Palestrini
    • 2
  1. 1.School of Finance and EconomicsUniversity of TechnologySydneyAustralia
  2. 2.Department of EconomicsUniversity of AnconaItaly
  3. 3.Laboratorio R. RevelliTorinoItaly