The Econometric Analysis of Microscopic Simulation Models
CentER Discussion Paper No. 2006-99
46 Pages Posted: 25 Oct 2006
Date Written: October 2006
Abstract
Microscopic simulation models are often evaluated based on visual inspection of the results. This paper presents formal econometric techniques to compare microscopic simulation (MS) models with real-life data. A related result is a methodology to compare different MS models with each other. For this purpose, possible parameters of interest, such as mean returns, or autocorrelation patterns, are classified and characterized. For each class of characteristics, the appropriate techniques are presented. We illustrate the methodology by comparing the MS model developed by Levy, Levy, and Solomon (2000) and the market fraction model developed by He and Li (2005a, b) with actual data
Keywords: Microscopic simulation models, Econometric analysis
JEL Classification: C10, G12
Suggested Citation: Suggested Citation
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