Palczewski, Jan, Schenk-Hoppé, Klaus and Wang, Tongya (2015) Itchy Feet vs Cool Heads: Flow of Funds in an Agent-based Financial Market’. Journal of Economic Dynamics and Control, 63. pp. 53-68.
Investors tend to move funds when they are unhappy with their current portfolio managers' performance. We study the effect of the size of this flow of funds in an agent-based model of the financial market. The model combines the discrete choice approach from agent-based modelling, where all capital is mobile, with the evolutionary finance framework where all growth is endogenous. Our results show that a small amount of freely flowing capital can have a huge impact on the market dynamics. In contrast to the standard model, moreover, clients' intensity of choice has a strong effect even when they exhibit only a very mild recency bias.
|Keywords:||Portfolio management, agent-based financial market, evolutionary finance, flow of funds|
|Date Deposited:||03 Sep 2015 09:42|
|Last Modified:||12 Jan 2016 09:55|
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