The Econometric Analysis of Microscopic Simulation Models

CentER Discussion Paper No. 2006-99

46 Pages Posted: 25 Oct 2006

See all articles by Youwei Li

Youwei Li

Hull University Business School

Bas Donkers

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM); Tinbergen Institute

Bertrand Melenberg

Tilburg University - Center for Economic Research (CentER)

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

Li, Youwei and Donkers, Bas and Melenberg, Bertrand, The Econometric Analysis of Microscopic Simulation Models (October 2006). CentER Discussion Paper No. 2006-99, Available at SSRN: https://ssrn.com/abstract=939518 or http://dx.doi.org/10.2139/ssrn.939518

Youwei Li (Contact Author)

Hull University Business School ( email )

University of Hull
Hull, HU6 7RX
United Kingdom

Bas Donkers

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
Rotterdam, NL 3000 DR
Netherlands
+31 10 408 2411 (Phone)
+31 10 408 9169 (Fax)

HOME PAGE: http://https://www.eur.nl/en/people/bas-donkers

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 2411 (Phone)
+31 10 408 9169 (Fax)

HOME PAGE: http://https://www.eur.nl/en/people/bas-donkers

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Bertrand Melenberg

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2730 (Phone)

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