Construction of the Financial Market Model Based on Heterogeneous Agent Interacting.docVIP

Construction of the Financial Market Model Based on Heterogeneous Agent Interacting 　　Abstract: In this paper, a financial market model based on heterogeneous agent interacting is constructed. In this model, two types of agents (fundamentalist and trend follower) are assumed to exist in financial market, and contrarian investment strategy and inertia investment strategy are respectively applied by them and realized investment return is used as fitness index, so as to form a heterogeneous expectation for the future price of risky assets. When investors convert different faiths or investment strategies, their proportions are presented to be time-varying. 　　Key words: Heterogeneous Agent Interacting; Stock pricing; Strategy Fitness; Proportions of Traders; Faith Evolution 　　Heterogeneous agent interacting model is a financial market model calculating financial theory based on agent. According to market environment and other agents behaviors, an agent dynamically adjusts his own investment strategy. Subsequently, an interaction between different agents and between agent and environment can continuously occur. The interaction at the micro-level of financial market will be presented as excessive price fluctuation, volatility clustering and other complex phenomena at the macro-level. 　　1 Meaning of Heterogeneity 　　There are two hypotheses for heterogeneity in general: differential information and differential interpretation. In the first hypothesis, information asymmetry problem is in existence. A group of individuals can acquire private information, but another group of individuals can only receive public information such as history price. Thus, information asymmetry makes heterogeneous expectation produced. The models of this aspect include the models proposed by Grundy (2002) [1] and Biais (2003). In the second hypothesis, the same information is explained by investors in a different way. This hypothesis is supported by the empirical studies made by Kandel and