Detail publikace

Prospect Theory in the heterogeneous agent model

Autor: PhDr. Jiří Kukačka Ph.D., Jan Polach
Typ: Články v impaktovaných časopisech
Rok: 2019
Číslo: 0
ISSN / ISBN:
Publikováno v: Journal of Economic Interaction and Coordination, 14 (1), pp. 147-174, DOI
Místo vydání:
Klíčová slova: heterogeneous agent model, Prospect Theory, behavioral finance, stylized facts
JEL kódy: C1, C61, D84, G12
Citace: Polach, J., Kukacka, J. (2019). Prospect Theory in the heterogeneous agent model. Journal of Economic Interaction and Coordination, 14 (1), pp. 147-174.
Granty: DYME – Dynamic Models in Economics
Abstrakt: Using the Heterogeneous Agent Model framework, we incorporate an extension based on Prospect Theory into a popular agent-based asset pricing model. The 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 its relevance with respect to financial data and stylized facts. We show that the Prospect Theory extension keeps the essential underlying mechanics of the model intact, however, that it changes the model dynamics considerably. Stability of the model increases but the occurrence of the fundamental strategy is more extreme. Moreover, the extension shifts the model closer to the behavior of real-world stock markets.

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