Exploring risks of financial markets through agent-based modeling

Hiroshi Takahashi, Takao Terano

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

4 Citations (Scopus)

Abstract

To investigate the risks of financial markets is one of the critical issues in risk management. This paper proposes an Agent-Based Model to clarify microscopic and macroscopic links between investor behaviors and price fluctuations in a financial market. The analysis presented in the paper focuses on the role that investors' overconfidence plays in the financial market. From the simulation study of the agent-based virtual market, we have found that (1) overconfident investors emerge in a bottom-up fashion in the market, and (2) these overconfident investors have the ability to contribute to the market, in which the trading prices are coincide with theoretical fundamental values.

Original languageEnglish
Title of host publication2006 SICE-ICASE International Joint Conference
Pages939-942
Number of pages4
DOIs
Publication statusPublished - 2006 Dec 1
Event2006 SICE-ICASE International Joint Conference - Busan, Korea, Republic of
Duration: 2006 Oct 182006 Oct 21

Publication series

Name2006 SICE-ICASE International Joint Conference

Other

Other2006 SICE-ICASE International Joint Conference
CountryKorea, Republic of
CityBusan
Period06/10/1806/10/21

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Keywords

  • Behavioral economics
  • Finance risk management
  • Inverse simulation
  • Multi-agent system
  • Overconfidence investors

ASJC Scopus subject areas

  • Computer Science Applications
  • Control and Systems Engineering
  • Electrical and Electronic Engineering

Cite this

Takahashi, H., & Terano, T. (2006). Exploring risks of financial markets through agent-based modeling. In 2006 SICE-ICASE International Joint Conference (pp. 939-942). [4109091] (2006 SICE-ICASE International Joint Conference). https://doi.org/10.1109/SICE.2006.315648