Universität zu Köln

Silver, Steven D., Raseta, Marko and Bazarova, Alina . Dynamics of Phase Transitions in Expectations for Financial Markets: An Agent-Based, Multicomponent Model. J. Behav. Financ.. ABINGDON: ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD. ISSN 1542-7579

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Abstract

We elaborate on behavioral foundations for agent expectations in financial markets and propose a multicomponent model. Components in bounded rational processing and imitative processing that can underlie frequently cited herding in financial markets are proposed in the agent-based model. We define a transition function for the dominance of a component in the distance between market price and price metrics based on fundamental value. The multicomponent model is then implemented in a network model of interacting agents. Our numerical exercises with the proposed model demonstrate the extensively cited property of phase transitions between ordered and disordered states that are commonly observed to presage critical points in financial markets is demonstrated. Additional numerical exercises examine the strength of neighbor connectivity in the component that generates herding as it relates to cycle in financial markets. Finally, we consider a methodology to operationalize the strength of neighbor connectivity as a policy variable for managing levels of this variable toward efficient markets.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Silver, Steven D. UNSPECIFIED UNSPECIFIED UNSPECIFIED Raseta, Marko UNSPECIFIED UNSPECIFIED UNSPECIFIED Bazarova, Alina UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-311539
DOI:	10.1080/15427560.2020.1848838
Journal or Publication Title:	J. Behav. Financ.
Publisher:	ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
Place of Publication:	ABINGDON
ISSN:	1542-7579
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language MARGIN REQUIREMENTS; EXCESS VOLATILITY; ISING-MODEL; RETURNS; INFORMATION; DECISION; CHAOS Multiple languages Business, Finance; Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/31153