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Computational Economics

, Volume 51, Issue 3, pp 493–511 | Cite as

Agent-Based Simulation and Microstructure Modeling of Immature Stock Markets

Case of a Single Risky Asset
  • Hazem Krichene
  • Mhamed-Ali El-Aroui
Article

Abstract

This work presents an artificial order-driven market able to reproduce mature and immature stock markets properties in the case of a single traded asset. This agent-based artificial market is designed to simulate characteristics of immature stock markets (high risk and low efficiency) by reproducing their stylized facts related mainly to information asymmetry and herd behavior. These two properties are modeled by combining social network and multi-agent simulations. The constructed scale-free social network, linking the modeled investors, gives rise to both informed and uninformed agents communities. Different assortative topologies are proposed and linked to different degrees of information asymmetry and market maturities. Several simulation experiments show that the modeled information asymmetry and herd behavior succeed in reproducing artificially some important stylized facts characterizing differences between immature and mature stock markets.

Keywords

Agent-based model Immature financial markets Network theory Information asymmetry Herd behavior Assortative network 

JEL Classification

C58 C63 G12 G14 G15 G17 O16 

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Université de Tunis, ISG de Tunis, LARODECTunisTunisia
  2. 2.Université de Carthage, FSEG Nabeul and LARODECTunisTunisia

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