Equilibrium Return and Agents’ Survival in a Multiperiod Asset Market: Analytic Support of a Simulation Model

  • Mikhail Anufriev
  • Pietro Dindo
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 584)


We provide explanations for the results of the Levy, Levy and Solomon model, a recent simulation model of financial markets. These explanations are based upon mathematical analysis of a dynamic model of a market with an arbitrary number of heterogeneous investors allocating their wealth between two assets. The investors’ choices are endogenously modeled in a general way and, in particular, consistent with the maximization of an expected utility. We characterize the equilibria of the model and their stability and discuss implications for the market return and agents’ survival. These implications are in agreement with the results of previous simulations. Thus, our analytic approach allows to explore the robustness of the previous analysis and to expand its spectrum.


Risk Aversion Risky Asset Memory Span Dividend Yield Equilibrium Return 
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.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. [1]
    Anufriev M (2005) Wealth-Driven Competition in a Speculative Financial Market: Examples with Maximizing Agents. CeNDEF Working Paper 05-17Google Scholar
  2. [2]
    Anufriev M, Bottazzi G, Pancotto F (2006) Equilibria, Stability and Asymptotic Dominance in a Speculative Market with Heterogeneous Agents. Journal of Economic Dynamics and Control (forthcoming)Google Scholar
  3. [3]
    Anufriev M, Bottazzi G (2006) Price and Wealth Dynamics in a Speculative Market with Generic Procedurally Rational Traders. CeNDEF Working Paper 06-02Google Scholar
  4. [4]
    Chiarella C, He X (2001) Asset price and wealth dynamics under heterogeneous expectations. Quantitative Finance 1:509–526CrossRefMathSciNetGoogle Scholar
  5. [5]
    Hommes CH (2006) Heterogeneous agents models in economics and finance. In: Judd K, Tesfatsion L (eds) Handbook of Computational Economics II: Agent-Based Computational Economics. Elsevier, North-HollandGoogle Scholar
  6. [6]
    Levy M, Levy H and Solomon S (1994) A microscopic model of the stock market: cycles, booms, and crashes. Economics Letters 45,1:103–111.zbMATHCrossRefGoogle Scholar
  7. [7]
    Levy M, Levy H (1996) The danger of assuming homogeneous expectations. Financial Analysts Journal May/June:65–70.Google Scholar
  8. [8]
    Levy M, Levy H and Solomon S (2000) Microscopic simulation of financial markets. Academic Press, London.Google Scholar
  9. [9]
    Zschischang E, Lux T (2001) Some new results on the Levy, Levy and Solomon microscopic stock market model. Physica A, 291:563–573.zbMATHCrossRefMathSciNetGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  • Mikhail Anufriev
    • 1
  • Pietro Dindo
    • 1
  1. 1.CeNDEFUniversity of AmsterdamAmsterdam

Personalised recommendations