Schizophrenic Representative Investors
NYU Poly - Department of Finance and Risk Engineering
February 16, 2013
Complex Systems (2013), Vol. 22, No. 1, pp. 61-73
Representative investors whose behavior is modeled by a deterministic finite automaton generate complexity both in the time series of each asset and in the cross-sectional correlation when the rule governing their behavior is schizophrenic, meaning the investor holds multiple seemingly contradictory beliefs simultaneously, either by switching between two different rules at each time step, or computing different responses to different assets.
Number of Pages in PDF File: 18
Keywords: complexity, representative investor, deterministic, behavioural
JEL Classification: G10, G12Accepted Paper Series
Date posted: April 27, 2010 ; Last revised: July 14, 2013
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