Complex Evolutionary Systems in Behavioral Finance

Arbeitspapier

Traditional finance is built on the rationality paradigm. This chapter discusses simple models from an alternative approach in which financial markets are viewed as complex evolutionary systems. Agents are boundedly rational and base their investment decisions upon market forecasting heuristics. Prices and beliefs about future prices co-evolve over time with mutual feedback. Strategy choice is driven by evolutionary selection, so that agents tend to adopt strategies that were successful in the past. Calibration of simple complexity models with heterogeneous expectations to real financial market data and laboratory experiments with human subjects are also discussed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 08-054/1

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Design of Experiments: Laboratory, Individual ; Design of Experiments: Laboratory, Group Behavior ; Expectations; Speculations ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: Asset pricing ; heterogeneous beliefs ; empirical validation ; forecasting experiments ; Anlageverhalten ; Test ; Agentenbasierte Modellierung ; Evolutionsökonomik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hommes, Cars ; Wagener, Florian
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/86740
• Last update: 10.03.2025, 11:44 AM CET