The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange
This paper aims to investigate the influence of investors’ confidence in their portfolio holding relative to their social group and of various social network topologies on the dynamics of an artificial stock exchange. An investor’s confidence depends on the growth rate of his or her wealth relative...
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| Format: | Article |
| Language: | English |
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Wiley
2021-01-01
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| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2021/1083640 |
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| _version_ | 1849307118979514368 |
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| author | Mario A. Bertella Jonathas N. Silva André L. Correa Didier Sornette |
| author_facet | Mario A. Bertella Jonathas N. Silva André L. Correa Didier Sornette |
| author_sort | Mario A. Bertella |
| collection | DOAJ |
| description | This paper aims to investigate the influence of investors’ confidence in their portfolio holding relative to their social group and of various social network topologies on the dynamics of an artificial stock exchange. An investor’s confidence depends on the growth rate of his or her wealth relative to his or her social group’s average wealth. If the investor’s confidence is low, the agent will change his or her asset allocation; otherwise, he or she will maintain it. We consider three types of social networks: Barabási, small-world, and random. The actual stock markets’ properties are recovered by this model: high excess kurtosis, skewness, volatility clustering, random walk prices, and stationary return rates. The networks’ topologies are found to impact both the structuration of investors in the space of strategies and their performance. Among other characteristics, we find that (i) the small-world networks show the highest degree of homophily; (ii) as investors can switch to more profitable strategies, the best approach to make profitable investments is the chartist one in Barabási and small-world topologies; and (iii) an unequal distribution and more significant relative wealth gains occur in the Barabási network. |
| format | Article |
| id | doaj-art-1ce55c5d69144b449c16b37e495a4ec0 |
| institution | Kabale University |
| issn | 1076-2787 1099-0526 |
| language | English |
| publishDate | 2021-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Complexity |
| spelling | doaj-art-1ce55c5d69144b449c16b37e495a4ec02025-08-20T03:54:51ZengWileyComplexity1076-27871099-05262021-01-01202110.1155/2021/10836401083640The Influence of Confidence and Social Networks on an Agent-Based Model of Stock ExchangeMario A. Bertella0Jonathas N. Silva1André L. Correa2Didier Sornette3Department of Economics, Sao Paulo State University (UNESP), Araraquara 14800-901, SP, BrazilDepartment of Economics, Sao Paulo State University (UNESP), Araraquara 14800-901, SP, BrazilDepartment of Economics, Sao Paulo State University (UNESP), Araraquara 14800-901, SP, BrazilDepartment of Management, Technology, and Economics, ETH Zurich, Zurich 8092, SwitzerlandThis paper aims to investigate the influence of investors’ confidence in their portfolio holding relative to their social group and of various social network topologies on the dynamics of an artificial stock exchange. An investor’s confidence depends on the growth rate of his or her wealth relative to his or her social group’s average wealth. If the investor’s confidence is low, the agent will change his or her asset allocation; otherwise, he or she will maintain it. We consider three types of social networks: Barabási, small-world, and random. The actual stock markets’ properties are recovered by this model: high excess kurtosis, skewness, volatility clustering, random walk prices, and stationary return rates. The networks’ topologies are found to impact both the structuration of investors in the space of strategies and their performance. Among other characteristics, we find that (i) the small-world networks show the highest degree of homophily; (ii) as investors can switch to more profitable strategies, the best approach to make profitable investments is the chartist one in Barabási and small-world topologies; and (iii) an unequal distribution and more significant relative wealth gains occur in the Barabási network.http://dx.doi.org/10.1155/2021/1083640 |
| spellingShingle | Mario A. Bertella Jonathas N. Silva André L. Correa Didier Sornette The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange Complexity |
| title | The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange |
| title_full | The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange |
| title_fullStr | The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange |
| title_full_unstemmed | The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange |
| title_short | The Influence of Confidence and Social Networks on an Agent-Based Model of Stock Exchange |
| title_sort | influence of confidence and social networks on an agent based model of stock exchange |
| url | http://dx.doi.org/10.1155/2021/1083640 |
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