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Estimation of agent-based models: the case of an asymmetric herding model

By Simone Alfarano, Thomas Lux and Friedrich Wagner

Abstract

considers security markets as efficient mechanism for immediate and unbiased incorporation of new information into prices. Within the EMH, as argued by Friedman [14] and Fama [11], the presence of non-rational traders can be neglected, since their idiosyncratic errors would be averaged out in the aggregate so that they could not significantly affect the market price. Rather, they would progressively lose money in favor of arbitrageurs, betting against them, so that the less rational agents would eventually disappear at the end from the market. Recent empirical and theoretical investigations have attacked the EMH and its implications in various ways. From a theoretical viewpoint, it has been shown that arbitrageurs may have limited capacit

Topics: Agent-based models, estimation, speculative markets, herding. EXTENDED ABSTRACT The Efficient Market Hypothesis (EMH hereafter
Year: 2005
OAI identifier: oai:CiteSeerX.psu:10.1.1.320.3714
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