This chapter surveys research on agent-based models used in finance. It will concentrate on models where the use of computational tools is critical for the process of crafting models which give insights into the importance and dynamics of investor heterogeneity in many financial settings.

While investors demand a premium to hold stocks with high illiquidity level and risk, they underreact to stock-level liquidity shocks and idiosyncratic liquidity. Built on Baker and Stein (2004) market liquidity model, this paper: (i) reports a significant relationship between market liquidity...

While investors demand a premium to hold stocks with high illiquidity level and risk, they underreact to stock-level liquidity shocks and idiosyncratic liquidity. Built on Baker and Stein (2004) model, this paper documents: (i) significant relationship between market liquidity and sentiment,...