In this paper we provide a brief introduction to the literature on agent-based financial modelling and, more specifically, artificial stock market modelling. In the selective literature review two broad categories of artificial stock market models are discussed: models based on hard-wired rules...

The covariance between US Treasury bond returns and stock returns has moved considerably over time. While it was slightly positive on average in the period 1953--2009, it was unusually high in the early 1980''s and negative in the 2000''s, particularly in the downturns of 2000--02 and 2007--09....

A long return history is useful in estimating the current equity premium even if the historical distribution has experienced structural breaks. The long series helps not only if the timing of breaks is uncertain but also if one believes that large shifts in the premium are unlikely or that the...

We construct asset markets, that are similar to those studied by Smith, Suchanek and Willians (1988), in which bubbles and crashes tended to occur. The main difference between the markets studied here and those studied by Smith et al. are that in the markets studied here, the fundamental values...

We report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets. In a setting in which speculation is not possible, bubbles and crashes are observed. The results suggest that the departures from fundamental...

Three essays comprise this dissertation. The first essay uses panel data to show that labor income risk alone cannot explain limited stock market participation. However, transaction costs and household demographics, considered jointly, can determine both the discrete choice of whether to hold...

Evidence suggests that arbitragers exchange investment ideas. We analyze why and under what circumstances sharing occurs. Our model suggests that sharing ideas will lead to the following: more efficient asset prices, larger arbitrager profits, and correlated arbitrager returns. We predict that...

Evidence suggests that arbitragers exchange investment ideas. We analyze why and under what circumstances sharing occurs. Our model suggests that sharing ideas will lead to the following: more efficient asset prices, larger arbitrager profits, and correlated arbitrager returns. We predict that...

This article shows that the Capital Asset Pricing Model-based capital budgeting criteria proposed by Tuttle and Litzenberger (1968), Mossin (1969), Hamada (1969), Stapleton (1971), Rubinstein (1973), Bierman and Hass (1973) and Bogue and Roll (1974) are equivalent. They all state that a project...

The rate of information diffusion and, consequently, price discovery are conditional not only upon the design of the market microstructure but also the informational structure. This paper presents a market microstructure model showing that an increasing number of information hierarchies among...