| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 837920 | Nonlinear Analysis: Real World Applications | 2011 | 8 Pages |
In this paper, an artificial stock market characterized by heterogeneous and informed agents is presented. The heterogeneous agents are seen as nodes of sparsely connected graphs. The agents trade risky assets and are characterized by sentiments, amount of cash and stocks owned. Agents share information and sentiments by means of interactions determined by graphs. A central market maker (clearing house mechanism) determines the price processes for each stock at the intersection of the demand and supply curves. In this framework, the statistical properties of the univariate and multivariate process of prices and returns are studied. Importantly, concerning univariate price processes, the proposed model is able to reproduce unit root, volatility cluster and fat tails of returns. The multivariate price process exhibits both static and dynamic stylized facts, in particular the presence of static factors and common trends. Static factors are studied making reference to the cross-correlation between returns of different stocks, whereas the common trends are investigated considering the variance–covariance matrix of prices. The proposed approach allows to endogenously reproduce the multivariate stylized facts.
