De Kamps, M, Ladley, D and Simaitis, A (2014) Heterogeneous beliefs in over-the-counter markets. Journal of Economic Dynamics and Control, 41. 50 - 68. ISSN 0165-1889
Abstract
The behavior and stability of over-the-counter markets is of central concern to regulators. Little is known, however, about how the structure of these markets determine their properties. In this paper we consider an over-the-counter market populated by boundedly rational heterogeneous traders in which the structure is represented by a network. Stability is found to decrease as the market becomes less well connected, however, the configuration of connections has a significant effect. The presence of hubs, such as those found in scale free networks increases stability and decreases volatility whilst small-world short-cut links have the opposite effect. Volatility in the fundamental value increases market volatility, however, volatility in the riskless asset returns has an ambiguous effect.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2014 Elsevier B.V. Uploaded in accordance with the publisher's self-archiving policy. NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Dynamics and Control. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Dynamics and Control, 41,(2014) DOI 10.1016/j.jedc.2014.02.009 |
Keywords: | Boundedly rationality; Heterogeneous agent model; Network; Over-the-counter; Stability |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Engineering & Physical Sciences (Leeds) > School of Computing (Leeds) > Artificial Intelligence & Biological Systems (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 06 Nov 2014 13:53 |
Last Modified: | 23 Jan 2018 22:26 |
Published Version: | http://dx.doi.org/10.1016/j.jedc.2014.02.009 |
Status: | Published |
Publisher: | Elsevier |
Refereed: | Yes |
Identification Number: | 10.1016/j.jedc.2014.02.009 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:81032 |