Showing papers by "Blake LeBaron published in 2010"
TL;DR: In this article, the authors conjecture that traders' order-splitting is related to long-memories of trading volume, volatility, and order-signs in stock markets, and they demonstrate that order splitting can be a possible cause for these empirical properties.
Abstract: Recent empirical research has documented long-memories of trading volume, volatility, and order-signs in stock markets. We conjecture that traders’ order-splitting is related to these empirical features. This study conducts simulations on an order-driven economy where agents split their orders into small pieces and execute piece by piece to reduce price impact. We demonstrate that we can replicate the long-memories in our order-splitting economy and conclude that order-splitting can be a possible cause for these empirical properties.
22 citations
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TL;DR: In this paper, the authors consider the impact of heterogeneous gain learning in an asset pricing model and show that agents putting large amounts of weight on the recent past in their volatility models control a large fraction of wealth, and are important in perpetuating the volatility magnifying dynamics of the market.
Abstract: This paper considers the impact of heterogeneous gain learning in an asset pricing model. A relatively stylized model is shown to generate persistent swings of asset prices from their fundamental values which replicates long range samples of U.S financial data. The detailed mechanisms of the learning models are then explored. Evidence suggests that agents' perceptions of risk and its dynamics and persistence are important in generating appropriate price/fundamental dynamics. Agents putting large amounts of weight on the recent past in their volatility models control a large fraction of wealth, and are important in perpetuating the volatility magnifying dynamics of the market.
4 citations
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TL;DR: In this paper, the authors present a new agent-based financial market, which is designed to be both simple enough to gain insights into the nature and structure of what is going on at both the agent and macro levels, but remain rich enough to allow for many interesting evolutionary experiments.
Abstract: This paper presents a new agent-based financial market. It is designed to be both simple enough to gain insights into the nature and structure of what is going on at both the agent and macro levels, but remain rich enough to allow for many interesting evolutionary experiments. The model is driven by heterogeneous agents who put varying weights on past information as they design portfolio strategies. It faithfully generates many of the common stylized features of asset markets. It also yields some insights into the dynamics of agent strategies and how they yield market instabilities.
1 citations
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TL;DR: In this article, the probability of a ''lost decade'' where equity investments lose value over a ten-year period was estimated, and the authors showed that mistaken perceptions of using arithmetic means could account for some common misconceptions about the chance of losses over a decade.
Abstract: This paper estimates the probability of a ``lost decade'' where equity investments lose value over a ten year period. The findings are a reminder that equity investments are risky even over longer time periods, and investors should take this into consideration when making portfolio choices. It also introduces a simple method to allow the reader to combine beliefs about long run stock returns along with computer simulated return distributions. Finally, it is shown that mistaken perceptions of using arithmetic means could account for some common misconceptions about the chance of losses over a decade.
1 citations