The Econometric Analysis of Microscopic Simulation Models

Microscopic simulation models are often evaluated based on visual inspection of the results.This paper presents formal econometric techniques to compare microscopic simulation (MS) models with real-life data.A related result is a methodology to compare different MS models with each other.For this purpose, possible parameters of interest, such as mean returns, or autocorrelation patterns, are classified and characterized.For each class of characteristics, the appropriate techniques are presented.We illustrate the methodology by comparing the MS model developed by Levy, Levy, and Solomon (2000) and the market fraction model developed by He and Li (2005a, b) with actual dataMicroscopic simulation models;Econometric analysis

Models of Transportation and Land Use Change: A Guide to the Territory

Modern urban regions are highly complex entities. Despite the difficulty of modeling every relevant aspect of an urban region, researchers have produced a rich variety models dealing with inter-related processes of urban change. The most popular types of models have been those dealing with the relationship between transportation network growth and changes in land use and the location of economic activity, embodied in the concept of accessibility. This paper reviews some of the more common frameworks for modeling transportation and land use change, illustrating each with some examples of operational models that have been applied to real-world settings.Transport, land use, models, review network growth, induced demand, induced supply

Microscopic models of financial markets

This review deals with several microscopic models of financial markets which have been studied by economists and physicists over the last decade: Kim-Markowitz, Levy-Levy-Solomon, Cont-Bouchaud, Solomon-Weisbuch, Lux-Marchesi, Donangelo-Sneppen and Solomon-Levy-Huang. After an overview of simulation approaches in financial economics, we first give a summary of the Donangelo-Sneppen model of monetary exchange and compare it with related models in economics literature. Our selective review then outlines the main ingredients of some influential early models of multi-agent dynamics in financial markets (Kim-Markowitz, Levy-Levy-Solomon). As will be seen, these contributions draw their inspiration from the complex appearance of investors' interactions in real-life markets. Their main aim is to reproduce (and, thereby, provide possible explanations) for the spectacular bubbles and crashes seen in certain historical episodes, but they lack (like almost all the work before 1998 or so) a perspective in terms of the universal statistical features of financial time series. In fact, awareness of a set of such regularities (power-law tails of the distribution of returns, temporal scaling of volatility) only gradually appeared over the nineties. With the more precise description of the formerly relatively vague characteristics (e.g. moving from the notion of fat tails to the more concrete one of a power-law with index around three), it became clear that financial markets dynamics give rise to some kind of universal scaling laws. Showing similarities with scaling laws for other systems with many interacting subunits, an exploration of financial markets as multi-agent systems appeared to be a natural consequence. This topic was pursued by quite a number of contributions appearing in both the physics and economics literature since the late nineties. From the wealth of different flavors of multi-agent models that have appeared by now, we discuss the Cont-Bouchaud, Solomon-Levy-Huang and Lux-Marchesi models. Open research questions are discussed in our concluding section. --

The Econometric Analysis of Microscopic Simulation Models

Microscopic simulation models are often evaluated based on visual inspection of the results.This paper presents formal econometric techniques to compare microscopic simulation (MS) models with real-life data.A related result is a methodology to compare different MS models with each other.For this purpose, possible parameters of interest, such as mean returns, or autocorrelation patterns, are classified and characterized.For each class of characteristics, the appropriate techniques are presented.We illustrate the methodology by comparing the MS model developed by Levy, Levy, and Solomon (2000) and the market fraction model developed by He and Li (2005a, b) with actual data

Should network structure matter in agent-based finance?

We derive microscopic foundations for a well-known probabilistic herding model in the agent-based finance literature. Lo and behold, the model is quite robust with respect to behavioral heterogeneity, yet structural heterogeneity, in the sense of an underlying network structure that describes the very feasibility of agent interaction, has a crucial and non-trivial impact on the macroscopic properties of the model

Heterogeneous Agent Models in Economics and Finance, In: Handbook of Computational Economics II: Agent-Based Computational Economics, edited by Leigh Tesfatsion and Ken Judd , Elsevier, Amsterdam 2006, pp.1109-1186.

This chapter surveys work on dynamic heterogeneous agent models (HAMs) in economics and finance. Emphasis is given to simple models that, at least to some extent, are tractable by analytic methods in combination with computational tools. Most of these models are behavioral models with boundedly rational agents using different heuristics or rule of thumb strategies that may not be perfect, but perform reasonably well. Typically these models are highly nonlinear, e.g. due to evolutionary switching between strategies, and exhibit a wide range of dynamical behavior ranging from a unique stable steady state to complex, chaotic dynamics. Aggregation of simple interactions at the micro level may generate sophisticated structure at the macro level. Simple HAMs can explain important observed stylized facts in financial time series, such as excess volatility, high trading volume, temporary bubbles and trend following, sudden crashes and mean reversion, clustered volatility and fat tails in the returns distribution.

DEVELOPMENT OF A MIXED-FLOW OPTIMIZATION SYSTEM FOR EMERGENCY EVACUATION IN URBAN NETWORKS

In most metropolitan areas, an emergency evacuation may demand a potentially large number of evacuees to use transit systems or to walk over some distance to access their passenger cars. In the process of approaching designated pick-up points for evacuation, the massive number of pedestrians often incurs tremendous burden to vehicles in the roadway network. Hence, one critical issue in a multi-modal evacuation planning is the effective coordination of the vehicle and pedestrian flows by considering their complex interactions. The purpose of this research is to develop an integrated system that is capable of generating the optimal evacuation plan and reflecting the real-world network traffic conditions caused by the conflicts of these two types of flows. The first part of this research is an integer programming model designed to optimize the control plans for massive mixed pedestrian-vehicle flows within the evacuation zone. The proposed model, integrating the pedestrian and vehicle networks, can effectively account for their potential conflicts during the evacuation. The model can generate the optimal routing strategies to guide evacuees moving toward either their pick-up locations or parking areas and can also produce a responsive plan to accommodate the massive pedestrian movements. The second part of this research is a mixed-flow simulation tool that can capture the conflicts between pedestrians, between vehicles, and between pedestrians and vehicles in an evacuation network. The core logic of this simulation model is the Mixed-Cellular Automata (MCA) concept, which, with some embedded components, offers a realistic mechanism to reflect the competing and conflicting interactions between vehicle and pedestrian flows. This study is expected to yield the following contributions * Design of an effective framework for planning a multi-modal evacuation within metropolitan areas; * Development of an integrated mixed-flow optimization model that can overcome various modeling and computing difficulties in capturing the mixed-flow dynamics in urban network evacuation; * Construction and calibration of a new mixed-flow simulation model, based on the Cellular Automaton concept, to reflect various conflicting patterns between vehicle and pedestrian flows in an evacuation network

Introduction to urban simulation design and development of operational models

This chapter has sought to explain the context, policy applications, and major design choices in the process of developing an operational urban simulation model, with specific reference to UrbanSim as a case study. It has been argued that careful design at each stage of the process is needed to make the model sensitive to the policies of principal concern, to make the data and computational requirements manageable, to make the model usable by staff and other users with appropriate levels of training, and to fit into the operational practices of the relevant organizations. To be useful (relevant) in the policy process, model design should carefully integrate the elements discussed in the chapter into a design that fits well into a specific institutional and political context, and evolve to adapt to changing conditions. This introduction to the design process sets the stage for more in-depth discussion of specification and operational issues in model use. The UrbanSim system is being further developed to adapt to varying data availability, different factors influencing agent choices in locations ranging from newer and rapidly growing US metropolitan areas in other parts of the world. Considerable effort is now being devoted to developing environmental components of the system such as land cover change, and to developing a robust interface and tools for visualization and evaluation of policy scenarios. Document type: Part of book or chapter of boo