Reaction to Extreme Events in a Minimal Agent Based Model

Part of the New Economic Windows book series (NEW)


We consider the issue of the overreaction of financial markets to a sudden price change. In particular, we focus on the price and the population dynamics which follows a large fluctuation. In order to investigate these aspects from different perspectives we discuss the known results for empirical data, the Lux-Marchesi model and a minimal agent based model which we have recently proposed. We show that, in this framework, the presence of a overreaction is deeply linked to the population dynamics. In particular, the presence of a destabilizing strategy in the market is a necessary condition to have an overshoot with respect to the exogenously induced price fluctuation. Finally, we analyze how the memory of the agents can quantitatively affect this behavior.


Agent Base Model Price Dynamic Price Movement Minimal Agent Trivial Connection 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



The authors thank János Kertész for the interesting discussions. We acknowledge support from the projects FET Open Project FOC nr. 255987 and the PNR national project CRISIS-Lab.


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Copyright information

© Springer-Verlag Italia 2013

Authors and Affiliations

  1. 1.ISC-CNRRomaItaly
  2. 2.Dipartimento di FisicaSapienza, Università di RomaRomaItaly

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