Confidence and the Stock Market: An Agent-Based Approach

Detalhes bibliográficos
Autor(a) principal: Bertella, Mario Augusto [UNESP]
Data de Publicação: 2014
Outros Autores: Pires, Felipe R., Feng, Ling, Stanley, Harry Eugene
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Institucional da UNESP
Texto Completo: http://dx.doi.org/10.1371/journal.pone.0083488
http://hdl.handle.net/11449/111553
Resumo: Using a behavioral finance approach we study the impact of behavioral bias. We construct an artificial market consisting of fundamentalists and chartists to model the decision-making process of various agents. The agents differ in their strategies for evaluating stock prices, and exhibit differing memory lengths and confidence levels. When we increase the heterogeneity of the strategies used by the agents, in particular the memory lengths, we observe excess volatility and kurtosis, in agreement with real market fluctuations-indicating that agents in real-world financial markets exhibit widely differing memory lengths. We incorporate the behavioral traits of adaptive confidence and observe a positive correlation between average confidence and return rate, indicating that market sentiment is an important driver in price fluctuations. The introduction of market confidence increases price volatility, reflecting the negative effect of irrationality in market behavior.
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spelling Confidence and the Stock Market: An Agent-Based ApproachUsing a behavioral finance approach we study the impact of behavioral bias. We construct an artificial market consisting of fundamentalists and chartists to model the decision-making process of various agents. The agents differ in their strategies for evaluating stock prices, and exhibit differing memory lengths and confidence levels. When we increase the heterogeneity of the strategies used by the agents, in particular the memory lengths, we observe excess volatility and kurtosis, in agreement with real market fluctuations-indicating that agents in real-world financial markets exhibit widely differing memory lengths. We incorporate the behavioral traits of adaptive confidence and observe a positive correlation between average confidence and return rate, indicating that market sentiment is an important driver in price fluctuations. The introduction of market confidence increases price volatility, reflecting the negative effect of irrationality in market behavior.Sao Paulo State University (UNESP)Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)ONRDTRANSFSao Paulo State Univ UNESP, Dept Econ, Sao Paulo, BrazilBoston Univ, Ctr Polymer Studies, Boston, MA 02215 USABoston Univ, Dept Phys, Boston, MA 02215 USACompanhia Metropolitano Sao Paulo, Sao Paulo, BrazilNatl Univ Singapore, Dept Phys, Singapore 117548, SingaporeNatl Univ Singapore, Ctr Computat Sci & Engn, Singapore 117548, SingaporeSao Paulo State Univ UNESP, Dept Econ, Sao Paulo, BrazilFAPESP: 12/17670-6ONRN00014-12-1-0548DTRAHDTRA-1-10-1-0014DTRAHDTRA-1-09-1-0035NSFCMMI 1125290Public Library ScienceUniversidade Estadual Paulista (Unesp)Boston UniversityCompanhia Metropolitano Sao PauloNatl Univ SingaporeBertella, Mario Augusto [UNESP]Pires, Felipe R.Feng, LingStanley, Harry Eugene2014-12-03T13:08:45Z2014-12-03T13:08:45Z2014-01-08info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/article9application/pdfhttp://dx.doi.org/10.1371/journal.pone.0083488Plos One. San Francisco: Public Library Science, v. 9, n. 1, 9 p., 2014.1932-6203http://hdl.handle.net/11449/11155310.1371/journal.pone.0083488WOS:000329862500051WOS000329862500051.pdf9960511866241705Web of Sciencereponame:Repositório Institucional da UNESPinstname:Universidade Estadual Paulista (UNESP)instacron:UNESPengPLOS ONE2.7661,164info:eu-repo/semantics/openAccess2024-06-10T19:42:22Zoai:repositorio.unesp.br:11449/111553Repositório InstitucionalPUBhttp://repositorio.unesp.br/oai/requestopendoar:29462024-08-05T17:31:54.342566Repositório Institucional da UNESP - Universidade Estadual Paulista (UNESP)false
dc.title.none.fl_str_mv Confidence and the Stock Market: An Agent-Based Approach
title Confidence and the Stock Market: An Agent-Based Approach
spellingShingle Confidence and the Stock Market: An Agent-Based Approach
Bertella, Mario Augusto [UNESP]
title_short Confidence and the Stock Market: An Agent-Based Approach
title_full Confidence and the Stock Market: An Agent-Based Approach
title_fullStr Confidence and the Stock Market: An Agent-Based Approach
title_full_unstemmed Confidence and the Stock Market: An Agent-Based Approach
title_sort Confidence and the Stock Market: An Agent-Based Approach
author Bertella, Mario Augusto [UNESP]
author_facet Bertella, Mario Augusto [UNESP]
Pires, Felipe R.
Feng, Ling
Stanley, Harry Eugene
author_role author
author2 Pires, Felipe R.
Feng, Ling
Stanley, Harry Eugene
author2_role author
author
author
dc.contributor.none.fl_str_mv Universidade Estadual Paulista (Unesp)
Boston University
Companhia Metropolitano Sao Paulo
Natl Univ Singapore
dc.contributor.author.fl_str_mv Bertella, Mario Augusto [UNESP]
Pires, Felipe R.
Feng, Ling
Stanley, Harry Eugene
description Using a behavioral finance approach we study the impact of behavioral bias. We construct an artificial market consisting of fundamentalists and chartists to model the decision-making process of various agents. The agents differ in their strategies for evaluating stock prices, and exhibit differing memory lengths and confidence levels. When we increase the heterogeneity of the strategies used by the agents, in particular the memory lengths, we observe excess volatility and kurtosis, in agreement with real market fluctuations-indicating that agents in real-world financial markets exhibit widely differing memory lengths. We incorporate the behavioral traits of adaptive confidence and observe a positive correlation between average confidence and return rate, indicating that market sentiment is an important driver in price fluctuations. The introduction of market confidence increases price volatility, reflecting the negative effect of irrationality in market behavior.
publishDate 2014
dc.date.none.fl_str_mv 2014-12-03T13:08:45Z
2014-12-03T13:08:45Z
2014-01-08
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://dx.doi.org/10.1371/journal.pone.0083488
Plos One. San Francisco: Public Library Science, v. 9, n. 1, 9 p., 2014.
1932-6203
http://hdl.handle.net/11449/111553
10.1371/journal.pone.0083488
WOS:000329862500051
WOS000329862500051.pdf
9960511866241705
url http://dx.doi.org/10.1371/journal.pone.0083488
http://hdl.handle.net/11449/111553
identifier_str_mv Plos One. San Francisco: Public Library Science, v. 9, n. 1, 9 p., 2014.
1932-6203
10.1371/journal.pone.0083488
WOS:000329862500051
WOS000329862500051.pdf
9960511866241705
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv PLOS ONE
2.766
1,164
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv 9
application/pdf
dc.publisher.none.fl_str_mv Public Library Science
publisher.none.fl_str_mv Public Library Science
dc.source.none.fl_str_mv Web of Science
reponame:Repositório Institucional da UNESP
instname:Universidade Estadual Paulista (UNESP)
instacron:UNESP
instname_str Universidade Estadual Paulista (UNESP)
instacron_str UNESP
institution UNESP
reponame_str Repositório Institucional da UNESP
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repository.name.fl_str_mv Repositório Institucional da UNESP - Universidade Estadual Paulista (UNESP)
repository.mail.fl_str_mv
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