Working Paper Nr. 141 im volkswirtschaftlichen BERG-Verlag ver?ffentlicht!

Tomasz Makarewicz hat mit "Traders, forecasters and financial instability:  A model of individual learning of  anchor-and-adjustment heuristics" Working Paper Nr. 141 im volkswirtschaftlichen BERG-Verlag Bamberg ver?ffentlich!

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Abstract:

Behavioral and experimental literature on financial instability focuses on either sub-jective price expectations (Learning-to-Forecast experiments) or individual trading (Learning-to-Optimize experiments).  Bao et al. (2017) have shown that subjects have problemswith both tasks.  In this paper, I explore these experimental results by investigating amodel in which financial traders individually learn how to use forecasting and/or tradinganchor-and-adjustment heuristics by updating them with Genetic Algorithms.The model replicates the main outcomes of these two threads of the experimentalfinance literature.  It shows that both forecasters and traders coordinate on chasing assetprice trends, which in turn causes substantial and self-fulfilling price oscillations, albeitlarger and faster in the case of trading markets.  When agents have to learn both tasks,financial instability becomes more persistent.