Public information, heterogeneous attention and market instability

Autor: Chengyao Wu, Yonghua Cen, Peng Peng, Huiyang Chen
Rok vydání: 2019
Předmět:
Zdroj: Soft Computing. 24:3591-3599
ISSN: 1433-7479
1432-7643
DOI: 10.1007/s00500-019-04126-9
Popis: In this paper, we investigate how market instability is formed with investment decision models of heterogeneous agents who are characterized by different selectivities of attention to public information. In the nonlinear dynamic decision model, agents make decisions on trading volume based on their own volume and marginal payoff of the previous period, as well as their selective attention to public information. One goal of this paper is to use the model to explore the condition under which public information could trigger the market instability. A second, related, goal is to study whether there is other investor behavior factor that leads to market instability. We find that some traders’ significant attention to bad news or most traders’ significant attention to good news can lead to market instability. We also find that whole market also may develop into chaos through bifurcation, with increasing relative trading adjustment speed responding to marginal payoff for some traders, although all traders pay no attention to public information. The relative trading adjustment speed responding to marginal payoff is more likely to cause market instability than public information. Our findings reveal an extremely simple stylized fact that market instability always occurs when there is no public information.
Databáze: OpenAIRE
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