Effects of Common Factors on Dynamics of Stocks Traded by Investors with Limited Information Capacity
Authored by Songtao Wu, Jianmin He, Chao Wang
Date Published: 2017
DOI: 10.1155/2017/6831596
Sponsors:
Chinese National Natural Science Foundation
Platforms:
No platforms listed
Model Documentation:
Other Narrative
Mathematical description
Model Code URLs:
Model code not found
Abstract
An artificial stock market with agent-based model is built to
investigate effects of different information characteristics of common
factors on the dynamics stock returns. Investors with limited
information capacity update their beliefs based on the information they
have obtained and processed and optimize portfolios based on beliefs. We
find that with changing of concerned information characteristics the
uncertainty of stock price returns rises and is higher than the
uncertainty of intrinsic value returns. However, this increase is
constrained by the limited information capacity of investors. At the
same time, we also find that dependence between returns of stock prices
also increased with the changing information environment. The
uncertainty and dependency pertaining to prices show a positive
relationship. However, the positive relationship is weakened when taking
into account the features of intrinsic values, based on which prices are
generated.
Tags
behavior
time-series
Expectations
Efficiency
Financial-markets
Returns
Cross-section
Attention