Number of the records: 1
Prospect Theory in the Heterogeneous Agent Model
- 1.
SYSNO ASEP 0488438 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title Prospect Theory in the Heterogeneous Agent Model Author(s) Polach, J. (GB)
Kukačka, Jiří (UTIA-B) RID, ORCIDSource Title Journal of Economic Interaction and Coordination - ISSN 1860-711X
Roč. 14, č. 1 (2019), s. 147-174Number of pages 28 s. Publication form Print - P Language eng - English Country DE - Germany Keywords Heterogeneous Agent Model ; Prospect Theory ; Behavioral finance ; Stylized facts Subject RIV AH - Economics OECD category Finance R&D Projects GBP402/12/G097 GA ČR - Czech Science Foundation (CSF) Method of publishing Limited access Institutional support UTIA-B - RVO:67985556 UT WOS 000458774200006 EID SCOPUS 85044074958 DOI 10.1007/s11403-018-0219-6 Annotation Using the Heterogeneous Agent Model framework, we incorporate an extension based on Prospect Theory into a popular agent-based asset pricing model. This extension covers the phenomenon of loss aversion manifested in risk aversion and asymmetric treatment of gains and losses. Using Monte Carlo methods, we investigate behavior and statistical properties of the extended model and assess how our extension is manifested in different strategies. We show that, on the one hand, the Prospect Theory extension keeps the essential underlying mechanics of the model intact, but on the other hand it considerably changes the model dynamics. Stability of the model is increased and fundamentalists may be able to survive in the market more easily. When only the fundamentalists are loss-averse, other strategies profit more. Workplace Institute of Information Theory and Automation Contact Markéta Votavová, votavova@utia.cas.cz, Tel.: 266 052 201. Year of Publishing 2020 Electronic address https://link.springer.com/article/10.1007%2Fs11403-018-0219-6
Number of the records: 1