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Introducing Social Investors into Multi-Agent Models of Financial Markets

Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 4031)

Abstract

Existing models of financial market prices typically assume that investors are informed with economic data and that wealth maximization motivates them. This paper considers the social dimensions of investing and the effect that this additional motivation has on the evolution of prices in a multi-agent model of an equity market. Agents in this model represent both economically informed investors and socially motivated investors who base their decision to invest solely on the popularity of the investment activity itself. The new model captures in a primitive but important way the notion of frenzy associated with speculative manias and panics, and it offers further insight into such anomalies as market bubbles and crashes.

Keywords

Multi-Agent Model Financial Market Modelling Social Investors Herding Signalling Games 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  1. 1.Information Technology Program, Atkinson FacultyYork UniversityToronto, Ontario
  2. 2.Economics Program, Atkinson FacultyYork UniversityToronto, Ontario

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