Interacting agents in finance, entry written for the New Palgrave Dictionary of Economics, Second Edition, edited by L. Blume and S. Durlauf, Palgrave Macmillan, forthcoming 2006

Abstract

Interacting agents in finance represent a behavioral, agent-based approach in which financial markets are viewed as complex adaptive systems consisting of many boundedly rational agents interacting through simple heterogeneous investment strategies, constantly adapting their behavior in response to new information, strategy performance and through social interactions. An interacting agent system acts as a noise filter, transforming and amplifying purely random news about economic fundamentals into an aggregate market outcome exhibiting important stylized facts such as unpredictable asset prices and returns, excess volatility, temporary bubbles and sudden crashes, large and persistent trading volume, clustered volatility and long memory.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 117 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.