Time-variation of higher moments in a financial market with heterogeneous agents: An analytical approach

A growing body of recent literature allows for heterogenous trading strategies and limited rationality of agents in behavioral models of financial markets. More and more, this literature has been concerned with the explanation of some of the stylized facts of financial markets. It now seems that some previously mysterious time-series characteristics like fat tails of returns and temporal dependence of volatility can be observed in many of these models as macroscopic patterns resulting from the interaction among different groups of speculative traders. However, most of the available evidence stems from simulation studies of relatively complicated models which do not allow for analytical solutions. In this paper, this line of research is supplemented by analytical solutions of a simple variant of the seminal herding model introduced by Kirman [1993]. Embedding the herding framework into a simple equilibrium asset pricing model, we are able to derive closed-form solutions for the time-variation of higher moments as well as related quantities of interest enabling us to spell out under what circumstances the model gives rise to realistic behavior of the resulting time series --

A Formal Framework for Speedup Learning from Problems and Solutions

Speedup learning seeks to improve the computational efficiency of problem solving with experience. In this paper, we develop a formal framework for learning efficient problem solving from random problems and their solutions. We apply this framework to two different representations of learned knowledge, namely control rules and macro-operators, and prove theorems that identify sufficient conditions for learning in each representation. Our proofs are constructive in that they are accompanied with learning algorithms. Our framework captures both empirical and explanation-based speedup learning in a unified fashion. We illustrate our framework with implementations in two domains: symbolic integration and Eight Puzzle. This work integrates many strands of experimental and theoretical work in machine learning, including empirical learning of control rules, macro-operator learning, Explanation-Based Learning (EBL), and Probably Approximately Correct (PAC) Learning.Comment: See http://www.jair.org/ for any accompanying file

EASe : integrating search with learned episodes

Weak methods are insufficient to solve complex problems. Constrained weak methods, like hill-climbing, search too little of the problem space. Unconstrained weak methods, like breadth-first search, are intractable. Fortunately, through the integration of multiple weak methods more powerful problem solvers can be created. We demonstrate that augmenting a weak constrained search method with episodes provides a tractable method for solving a large class of problems. We demonstrate that these episodes can be generated using an unconstrained weak method while solving simple problems from a domain. We provide an analytical model of our approach and empirical results from the logic synthesis domain of VLSI design as well as the classic tile-sliding domain

Knowledge acquisition from text in a complex domain

Complex real world domains can be characterized by a large amount of data, their interactions and that the knowledge must often be related to concrete problems. Therefore, the available descriptions of real world domains do not easily lend themselves to an adequate representation. The knowledge which is relevant for solving a given problem must be extracted from such descriptions with the help of the knowledge acquisition process. Such a process must adequately relate the acquired knowledge to the given problem. An integrated knowledge acquisition framework is developed to relate the acquired knowledge to real world problems. The interactive knowledge acquisition tool COKAM+ is one of three acquisition tools within this integrated framework. It extracts the knowledge from text, provides a documentation of the knowledge and structures it with respect to problems. All these preparations can serve to represent the obtained knowledge adequately

Time-variation of higher moments in a financial market with heterogeneous agents: an analytical approach

A growing body of recent literature allows for heterogenous trading strategies and limited rationality of agents in behavioral models of financial markets. More and more, this literature has been concerned with the explanation of some of the stylized facts of financial markets. It now seems that some previously mysterious time-series characteristics like fat tails of returns and temporal dependence of volatility can be observed in many of these models as macroscopic patterns resulting from the interaction among different groups of speculative traders. However, most of the available evidence stems from simulation studies of relatively complicated models which do not allow for analytical solutions. In this paper, this line of research is supplemented by analytical solutions of a simple variant of the seminal herding model introduced by Kirman [1993]. Embedding the herding framework into a simple equilibrium asset pricing model, we are able to derive closed-form solutions for the time-variation of higher moments as well as related quantities of interest enabling us to spell out under what circumstances the model gives rise to realistic behavior of the resulting time series

A Selective Macro-learning Algorithm and its Application to the NxN Sliding-Tile Puzzle

One of the most common mechanisms used for speeding up problem solvers is macro-learning. Macros are sequences of basic operators acquired during problem solving. Macros are used by the problem solver as if they were basic operators. The major problem that macro-learning presents is the vast number of macros that are available for acquisition. Macros increase the branching factor of the search space and can severely degrade problem-solving efficiency. To make macro learning useful, a program must be selective in acquiring and utilizing macros. This paper describes a general method for selective acquisition of macros. Solvable training problems are generated in increasing order of difficulty. The only macros acquired are those that take the problem solver out of a local minimum to a better state. The utility of the method is demonstrated in several domains, including the domain of NxN sliding-tile puzzles. After learning on small puzzles, the system is able to efficiently solve puzzles of any size.Comment: See http://www.jair.org/ for an online appendix and other files accompanying this articl

The Non-linear Dynamics of Meaning-Processing in Social Systems

Social order cannot be considered as a stable phenomenon because it contains an order of reproduced expectations. When the expectations operate upon one another, they generate a non-linear dynamics that processes meaning. Specific meaning can be stabilized, for example, in social institutions, but all meaning arises from a horizon of possible meanings. Using Luhmann's (1984) social systems theory and Rosen's (1985) theory of anticipatory systems, I submit equations for modeling the processing of meaning in inter-human communication. First, a self-referential system can use a model of itself for the anticipation. Under the condition of functional differentiation, the social system can be expected to entertain a set of models; each model can also contain a model of the other models. Two anticipatory mechanisms are then possible: one transversal between the models, and a longitudinal one providing the modeled systems with meaning from the perspective of hindsight. A system containing two anticipatory mechanisms can become hyper-incursive. Without making decisions, however, a hyper-incursive system would be overloaded with uncertainty. Under this pressure, informed decisions tend to replace the "natural preferences" of agents and an order of cultural expectations can increasingly be shaped