Inspired by the theoretically oriented dynamic analysis of moving average rules in Chiarella, He and Hommes (CHH) (2006a) model, this paper conducts a dynamic analysis of a microstructure model of continuous double auctions in which the probability of heterogeneous agents to trade is determined...

We continue an investigation into a class of agent-based market models that are motivated by a psychologically-plausible form of bounded rationality. Some of the agents in an otherwise efficient hypothetical market are endowed with differing tolerances to the tension caused by being in the...

Using the Heterogeneous Agent Model framework, we incorporate an extension based on Prospect Theory into a popular agent-based asset pricing model. The extension covers the phenomenon of loss aversion manifested in risk aversion and asymmetric treatment of gains and losses. Using Monte Carlo...

Is the observed large increase in consumer indebtedness since 1970 beneficial for U.S. consumers? This paper quantitatively investigates the macroeconomic and welfare implications of relaxing borrowing constraints using a model with preferences featuring temptation and self-control. The model...

Unique administrative data on a representative population's cognitive abilities, spending, and financials reveal that consumers at or below median cognitive abilities barely react when their incentives to spend or borrow change, even if they earn high incomes and are financially unconstrained...

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...