Artificial Agents and Speculative Bubbles
Yann Semet, Sylvain Gelly, Marc Schoenauer and Michele Sebag
In: CF'04: International Conference on Computational Finance & its Applications (PKDD-2004), Sep 2004, Pisa, Italy.
Pertaining to Agent-based Computational Economics (ACE), this work
presents two models for the rise and downfall of speculative bubbles through
an exchange price fixing based on a double auction mechanism. The first
model is based in a finite time horizon context where total expected divi-
dends decrease along with time. The second model follows the greater fool
hypothesis: an agent behaviour depends on the comparison of its estimation
of risk with that of a virtual greater fool. Simulations shed some light on
the inﬂuent parameters and the necessary conditions for the appearance of
speculative bubbles in an asset market within the considered framework.