Exploring risks of financial markets through agent-based modeling

Hiroshi Takahashi; Takao Terano

doi:10.1109/SICE.2006.315648

Exploring risks of financial markets through agent-based modeling

Hiroshi Takahashi, Takao Terano

Research output: Chapter in Book/Report/Conference proceeding › Conference 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 language	English
Title of host publication	2006 SICE-ICASE International Joint Conference
Pages	939-942
Number of pages	4
DOIs	https://doi.org/10.1109/SICE.2006.315648
Publication status	Published - 2006 Dec 1
Externally published	Yes
Event	2006 SICE-ICASE International Joint Conference - Busan, Korea, Republic of Duration: 2006 Oct 18 → 2006 Oct 21

Publication series

Name	2006 SICE-ICASE International Joint Conference

Other

Other	2006 SICE-ICASE International Joint Conference
Country/Territory	Korea, Republic of
City	Busan
Period	06/10/18 → 06/10/21

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

Access to Document

10.1109/SICE.2006.315648

Cite this

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title = "Exploring risks of financial markets through agent-based modeling",

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.",

keywords = "Behavioral economics, Finance risk management, Inverse simulation, Multi-agent system, Overconfidence investors",

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AU - Takahashi, Hiroshi

AU - Terano, Takao

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N2 - 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.

AB - 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.

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KW - Finance risk management

KW - Inverse simulation

KW - Multi-agent system

KW - Overconfidence investors

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ER -

Exploring risks of financial markets through agent-based modeling

Abstract

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Keywords

ASJC Scopus subject areas

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