Title :
A system theoretic approach to behavioral finance
Author :
Gerencsér, László ; Mátyás, Zalán
Author_Institution :
Comput. & Autom. Inst., Hungarian Acad. of Sci., Budapest, Hungary
Abstract :
The purpose of this paper is to study a particular example of a feedback system modelling the behavior of agents in financial markets. The agent´s decision is based on his beliefs of the price dynamics and his behavior reflecting his attitude, such as risk aversion or risk preference. The convergence of the resulting iterative procedure is examined. A data driven stochastic approximation procedure for estimating the price dynamics is suggested. Simulation results for various behaviors are also presented.
Keywords :
feedback; iterative methods; pricing; stochastic processes; stock markets; behavioral finance; data driven stochastic approximation procedure; feedback system; financial markets; iterative procedure; price dynamics; risk aversion; risk preference; system theoretic approach; Closed loop systems; Convergence; Economic forecasting; Feedback; Finance; Macroeconomics; Modeling; Predictive models; Stochastic processes; Stock markets;
Conference_Titel :
Decision and Control, 2004. CDC. 43rd IEEE Conference on
Print_ISBN :
0-7803-8682-5
DOI :
10.1109/CDC.2004.1428652
