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on Computational Economics |
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Issue of 2013‒09‒06
five papers chosen by |
| By: | David Goldbaum (Economics Discipline Group, University of Technology, Sydney) |
| Abstract: | In the developed model, without knowing the trading strategies of the other traders in a financial market, traders cannot derive a rational expectations equilibrium. In a dynamic setting, market participants employ learning and adaptation to develop trading strategies to accommodate for this information deficiency. Model-consistent use of market-based information generally improves price performance. It can also produce episodes of extreme sudden mispricing despite model generated historical support for its use. Simulations examine the impact of information constraints and bounded rationality on general price efficiency and sudden market mispricing. |
| Keywords: | Heterogeneous Agents; Efficient Markets; Learning; Dynamics; Computational Economics; Market Failure |
| JEL: | G14 C62 D82 |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:14&r=cmp |
| By: | Grazzini, Jakob; Richiardi, Matteo (University of Turin) |
| Abstract: | Agent-based (AB) models are considered a promising tool for macroeconomic analysis. However, until estimation of AB models become a common practice, they will not get to the center stage of macroeconomics. Two diculties arise in the estimation of AB models: (i) the criterion function has no simple analytical expression, and (ii) the aggregate properties of the model cannot be analytically understood. The rst one calls for simulation-based estimation techniques; the second requires additional statistical testing in order to ensure that the simulated quantities are consistent estimators of the theoretical quantities. The possibly high number of parameters involved and the non-linearities in the theoretical quantities used for estimation add to the complexity of the problem. As these diculties are also shared, though to a dierent extent, by DSGE models, we rst look at the lessons that can be learned from this literature. We identify simulated minimum distance (SMD) as a practical approach to estimation of AB models, and we discuss the conditions which ensure consistency of SMD estimators in AB models |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201335&r=cmp |
| By: | Thomas Breuer; Hans-Joachim Vollbrecht; Martin Summer |
| Abstract: | We study the trading of real assets financed by collateralized loans in an agent based model of a continuous double auction. This approach provides a complementary perspective on recent advances in the general equilibrium theory of endogenous leverage by studying a model that simultaneously describes dynamic and equilibrium properties of the market. Rather than taking prices as parametric there is an explicit price formation process which can be simulated or studied empirically. This is important because the economics of leverage is key to the understanding of financial crisis. We find that simulated double auctions converge to stable final states close to the theoretical equilibrium state. Consistent with equilibrium theory, real assets are traded at a price above fundamental value in the double auction. The equilibrium level of leverage also emerges in the simulations of the double auction. JEL classification: D53, G12, G14, C63 |
| Keywords: | Leverage, Asset Pricing, Double Auction, Agent Based Modeling |
| Date: | 2013–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:onb:oenbwp:184&r=cmp |
| By: | Yuanhua Feng (University of Paderborn); Sarah Forstinger (University of Paderborn); Christian Peitz (University of Paderborn) |
| Abstract: | This paper discusses the detailed performance of an iterative plug-in (IPI) bandwidth selector for estimating the diurnal duration pattern in a recently proposed semiparametric autoregressive conditional duration (SemiACD) model. For this purpose an alternative formula of the asymptotically optimal bandwidth is proposed. A large simulation study was carried out based on this new formula. The effect of different factors, which affect the selected bandwidth is discussed in detail. It is shown that the proposed IPI algorithm works very well in practice and that the SemiACD model in general, is clearly superior to the parametric ACD model, if there is a deterministic trend in the duration data. It is also shown that the quality of the bandwidth selection, the diurnal pattern estimate and the parametric estimation will all be clearly improved, if the sample size is enlarged. Furthermore, according to the goodness-of-fit of the estimated diurnal pattern, a best combination of the above mentioned factors is found. |
| Keywords: | Autoregressive conditional duration, diurnal duration patterns, local linear estimator, iterative plug-in, simulation |
| JEL: | C14 C41 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:wpaper:66&r=cmp |
| By: | Peter C. B. Phillips (Yale University, University of Auckland, University of Southampton & Singapore Management University); Shu-Ping Shi (The Australian National University); Jun Yu (Singapore Management University) |
| Abstract: | This paper provides the limit theory of real time dating algorithms for bubble detection that were suggested in Phillips, Wu and Yu (2011, PWY) and Phillips, Shi and Yu (2013b, PSY). Bubbles are modeled using mildly explosive bubble episodes that are embedded within longer periods where the data evolves as a stochastic trend, thereby capturing normal market behavior as well as exuberance and collapse. Both the PWY and PSY estimates rely on recursive right tailed unit root tests (each with a different recursive algorithm) that may be used in real time to locate the origination and collapse dates of bubbles. Under certain explicit conditions, the moving window detector of PSY is shown to be a consistent dating algorithm even in the presence of multiple bubbles. The other algorithms are consistent detectors for bubbles early in the sample and, under stronger conditions, for subsequent bubbles in some cases. These asymptotic results and accompanying simulations guide the practical implementation of the procedures. They indicate that the PSY moving window detector is more reliable than the PWY strategy, sequential application of the PWY procedure and the CUSUM procedure. |
| Keywords: | Bubble duration, Consistency, Dating algorithm, Limit theory, Multiple bubbles, Real time detector. |
| JEL: | C15 C22 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:siu:wpaper:05-2013&r=cmp |