Analyzing the validity of passive investment strategies employing fundamental indices through agent-based simulation

Hiroshi Takahashi, Satoru Takahashi, Takao Terano

Research output: Chapter in Book/Report/Conference proceedingConference contribution

6 Citations (Scopus)

Abstract

This research analyzes the influence of indices which are employed in the asset management business on financial markets through agent-based simulation. In this analysis, we focus on a fundamental index, which has been proposed as a new benchmark for investments in place of price indices, which are currently employed in practical business affairs. As a result of intensive experiments in the market, we made the following interesting findings: (1) fundamental indexing works as effectively as a price indexing in the market when market prices reflect fundamental values; (2) fundamental indexing contributes to market efficiency. However, we also found drawbacks to fundamental indexing, such as the risk of destabilizing markets when too many investors employ passive investment strategies using the fundamental index. These results are significant from both practical and academic viewpoints. These analyses also demonstrate the effectiveness of agent-based techniques for financial research.

Original languageEnglish
Title of host publicationLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Pages180-189
Number of pages10
Volume6682 LNAI
DOIs
Publication statusPublished - 2011
Event5th KES International Conference on Agent and Multi-Agent Systems: Technologies and Applications, KES-AMSTA 2011 - Manchester, United Kingdom
Duration: 2011 Jun 292011 Jul 1

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume6682 LNAI
ISSN (Print)03029743
ISSN (Electronic)16113349

Other

Other5th KES International Conference on Agent and Multi-Agent Systems: Technologies and Applications, KES-AMSTA 2011
CountryUnited Kingdom
CityManchester
Period11/6/2911/7/1

Fingerprint

Agent-based Simulation
Indexing
Asset management
Industry
Market Efficiency
Asset Management
Financial Markets
Experiments
Benchmark
Strategy
Market
Demonstrate
Experiment
Business
Financial markets

Keywords

  • Agent Based-Model
  • Behavioral Finance
  • Financial Engineering
  • Fundamental Indexation
  • Passive Investment Strategy

ASJC Scopus subject areas

  • Computer Science(all)
  • Theoretical Computer Science

Cite this

Takahashi, H., Takahashi, S., & Terano, T. (2011). Analyzing the validity of passive investment strategies employing fundamental indices through agent-based simulation. In Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics) (Vol. 6682 LNAI, pp. 180-189). (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 6682 LNAI). https://doi.org/10.1007/978-3-642-22000-5_20

Analyzing the validity of passive investment strategies employing fundamental indices through agent-based simulation. / Takahashi, Hiroshi; Takahashi, Satoru; Terano, Takao.

Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics). Vol. 6682 LNAI 2011. p. 180-189 (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 6682 LNAI).

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Takahashi, H, Takahashi, S & Terano, T 2011, Analyzing the validity of passive investment strategies employing fundamental indices through agent-based simulation. in Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics). vol. 6682 LNAI, Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics), vol. 6682 LNAI, pp. 180-189, 5th KES International Conference on Agent and Multi-Agent Systems: Technologies and Applications, KES-AMSTA 2011, Manchester, United Kingdom, 11/6/29. https://doi.org/10.1007/978-3-642-22000-5_20
Takahashi H, Takahashi S, Terano T. Analyzing the validity of passive investment strategies employing fundamental indices through agent-based simulation. In Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics). Vol. 6682 LNAI. 2011. p. 180-189. (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)). https://doi.org/10.1007/978-3-642-22000-5_20
Takahashi, Hiroshi ; Takahashi, Satoru ; Terano, Takao. / Analyzing the validity of passive investment strategies employing fundamental indices through agent-based simulation. Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics). Vol. 6682 LNAI 2011. pp. 180-189 (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)).
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