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Come Together: The Role of Cognitively Biased Imitators in a Small Scale Agent-Based Financial Market

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Abstract

We analyze the consequences of the presence of imitators in a financial market populated by boundedly rational speculators. We consider imitators that only look at the recent success of the available trading rules. We show that the introduction of this kind of imitators makes the results more complicated but even more realistic. In particular, under some specific circumstances, imitators may stabilize an otherwise unstable market or, at the opposite, make unstable an otherwise stable scenario.

Keywords

Cognitive biases Bounded rationality Financial markets Agent-based models 

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© Springer Nature Singapore Pte Ltd. 2020

Authors and Affiliations

  1. 1.Department of Economics Marco BiagiUniversity of Modena and Reggio EmiliaModenaItaly
  2. 2.Department of Mathematical Disciplines, Mathematical Finance and EconometricsCatholic University of MilanMilanItaly

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