Carlos Pedro Goncalves
WHAT IS IT?
This is a model of an artificial financial market with heterogeneous boundedly rational agents that are influenced by the sentiment of their most close colleagues regarding the future evolution of the market.
The model is capable of generating the stylized facts of the real financial markets, specifically: excess volatility in the logarithmic returns, clustered volatility (characteristic of the well known GARCH signatures), bubbles and crashes.
The main influences behind this model were Vaga's coherent market hypothesis (Vaga, 1990) and Johansen, Ledoit, Sornette's model (Johansen et. al., 2002, Sornette, 2003), from now on denoted by JLS.
Our model may also be of interest to areas outside of finance, areas like, for instance, the study of social influence, opinion making and political decision.
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