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Avoiding regret in an agent-based asset pricing model

Research output: Contribution to journalArticle

Radu T. Pruna, Maria Polukarov, Nicholas R. Jennings

Original languageEnglish
JournalFinance research letters
Early online date28 Sep 2017
DOIs
Publication statusE-pub ahead of print - 28 Sep 2017

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Abstract

We use an agent-based asset pricing model to test the implications of the disposition effect (avoiding regret) on investors' interactions and price settings. We show that it has a direct impact on the returns series produced by the model, altering important stylized facts such as its heavy tails and volatility clustering. Moreover, we show that the horizon over which investors compute their wealth has no effect on the dynamics produced by the model.

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