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Wealth-driven competition in a speculative financial market: examples with maximizing agents
[journal article]
Abstract This paper demonstrates how both quantitative and qualitative results of a general, analytically tractable asset-pricing model in which heterogeneous agents behave consistently with a constant relative risk aversion assumption can be applied to the special case of optimizing behavior. The analysis... view more
This paper demonstrates how both quantitative and qualitative results of a general, analytically tractable asset-pricing model in which heterogeneous agents behave consistently with a constant relative risk aversion assumption can be applied to the special case of optimizing behavior. The analysis of the asymptotic properties of the market is performed using a geometric approach which allows the visualization of all possible equilibria by means of a simple one-dimensional Equilibrium Market Curve. The case of linear (particularly, mean-variance) investment functions is thoroughly analyzed. This analysis highlights the features which are specific to linear investment functions. As a consequence, some previous contributions of the agent-based literature are generalized.... view less
Classification
Economic Statistics, Econometrics, Business Informatics
Political Economy
Free Keywords
Asset pricing model; CRRA framework; Equilibrium market curve; Expected utility maximization; Mean-variance optimization; Linear investment functions
Document language
English
Publication Year
2008
Page/Pages
p. 363-380
Journal
Quantitative Finance, 8 (2008) 4
DOI
https://doi.org/10.1080/14697680701494534
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)