Download This PaperWhat Does the Financial Market Pricing Do? A Simulation Analysis with a View to Systemic Volatility, Exuberance and Vagary
25th Annual EAEPE Conference 2013, Research Area S (Evolutionary Economic Simulation), Paris, November 2013
Journal of Economic Interaction and Coordination, May 2015. DOI: 10.1007/s11403-015-0159-3
35 Pages Posted: 17 Nov 2013 Last revised: 22 May 2015
Date Written: November 1, 2013
Abstract
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory regimes for fundamental information provision, as well as to market confidence conditions among actual and potential investors. Regimes based upon mark-to-market (fair value) measurement of traded security, while generating higher linear correlation between market prices and fundamental signals, also involve higher market instability and volatility. These regimes also incur more relevant episodes of market exuberance and vagary in some regions of the market confidence space, where lower market liquidity further occurs.
Keywords: financial regulation, asset pricing, financial bubbles, market exuberance, market microstructure, common knowledge
JEL Classification: C63, D02, D47, D82, E17, E37, G1, G17, M41, M48
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