Journal Article
No. 2018-20 | April 23, 2018
Learning to forecast, risk aversion, and microstructural aspects of financial stability

Abstract

This paper presents a simulative model of a financial market, based on a fully operating order book with limit and market orders. The heterogeneity of traders is characterized not only with regards to their trading rules, but also by introducing a behavioral individual risk aversion and a learning ability influencing the process of expectations formation. Results show that individual learning may play a role in stabilizing the aggregate market dynamics, whereas the risk aversion has, counterintuitively, the opposite effect. 

Data Set

JEL Classification:

E44, E47, C63

Assessment

  • Downloads: 601 (Discussion Paper: 662)

Links

Cite As

Alessio Emanuele Biondo (2018). Learning to forecast, risk aversion, and microstructural aspects of financial stability. Economics: The Open-Access, Open-Assessment E-Journal, 12 (2018-20): 1–20. http://dx.doi.org/10.5018/economics-ejournal.ja.2018-20


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