... a math-ematical bias stemming from one of the as-sumptions underlying the capital asset prici... more ... a math-ematical bias stemming from one of the as-sumptions underlying the capital asset pricingmodel (CAPM). ... Clearly, the length of the "true" in-vestment horizon affects asset prices under con ... In the various empirical tests, the investment horizon has been selected arbitrarily ...
While Stochastic Dominance has been employed in various forms as early as 1932, it has only been ... more While Stochastic Dominance has been employed in various forms as early as 1932, it has only been since 1969-1970 that the notion has been developed and extensively employed in the area of economics, finance, agriculture, statistics, marketing and operations research. In ...
PLoS Neglected Tropical Diseases is an open-access journal publishing peer-reviewed research on t... more PLoS Neglected Tropical Diseases is an open-access journal publishing peer-reviewed research on the world\'s most neglected tropical diseases, such as elephantiasis, river blindness, leprosy, hookworm, schistosomiasis, and African sleeping sickness.
DIVERSIFICATION, PORTFOLIO ANALYSIS AND THE UNEASY CASE FOR CONGLOMERATE MERGERS Наш Levy* and Ma... more DIVERSIFICATION, PORTFOLIO ANALYSIS AND THE UNEASY CASE FOR CONGLOMERATE MERGERS Наш Levy* and Marshall SarnatI That horizontal and vertical mergers potentially can produce real economic gains is nowhere denied, but the economic case for a ...
... 2 The coefficient of correlation between railroad and public utility stock prices was 0.10 fo... more ... 2 The coefficient of correlation between railroad and public utility stock prices was 0.10 for the ... in year t. The returns have been calculated in dol-lars and, therefore, the indices have been ... raising the given portfolio return by half a percent and repeating the computation procedure ...
Microscopic Simulation (MS) uses a computer to represent and keep track of individual ("micr... more Microscopic Simulation (MS) uses a computer to represent and keep track of individual ("microscopic") elements in order to investigate complex systems which are analytically intractable. A methodology that was developed to solve physics problems, MS has been used to study the relation between microscopic behavior and macroscopic phenomena in systems ranging from those of atomic particles, to cars, animals, and even humans. In finance, MS can help explain, among other things, the effects of various elements of investor behavior on market dynamics and asset pricing. It is these issues in particular, and the value of an MS approach to finance in general, that are the subjects of this book. The authors not only put their work in perspective by surveying traditional economic analyses of investor behavior, but they also briefly examine the use of MS in fields other than finance. Most models in economics and finance assume that investors are rational. However, experimental studies reveal systematic deviations from rational behavior. How can we determine the effect of investors' deviations from rational behavior on asset prices and market dynamics? By using Microscopic Simulation, a methodology originally developed by physicists for the investigation of complex systems, the authors are able to relax classical assumptions about investor behavior and to model it as empirically and experimentally observed. This rounded and judicious introduction to the application of MS in finance and economics reveals that many of the empirically-observed "puzzles" in finance can be explained by investors' quasi-rationality. Researchers use the book because it models heterogeneous investors, a group that has proven difficult to model. Being able to predict how people will invest and setting asset prices accordingly is inherently appealing, and the combination of computing power and statistical mechanics in this book makes such modeling possible. Because many finance researchers have backgrounds in physics, the material here is accessible. Emphasizes investor behavior in determining asset prices and market dynamics Introduces Microscopic Simulation within a simplified framework Offers ways to model deviations from rational decision-making
We present a model of the stock market based on the behavior of individual investors. Simulations... more We present a model of the stock market based on the behavior of individual investors. Simulations exhibit rich phenomena which include cycles, booms, and crashes. Low dividend yield and more homogeneous market participants are shown to induce crashes.
Microscopic Simulation (MS) uses a computer to represent and keep track of individual (" mic... more Microscopic Simulation (MS) uses a computer to represent and keep track of individual (" microscopic") elements in order to investigate complex systems which are analytically intractable. A methodology that was developed to solve physics problems, MS has been used to study the relation between microscopic behavior and macroscopic phenomena in systems ranging from those of atomic particles, to cars, animals, and even humans. In finance, MS can help explain, among other things, the effects of various elements of ...
Although the representative individual framework has been shown to be generally illegitimate and ... more Although the representative individual framework has been shown to be generally illegitimate and erroneous, it continues to be widely used for lack of a more suitable approach. In this paper, we present an alternative methodology for economic study-the microscopic simulation (MS) approach. We employ the MS methodology to study a basic model of the stock market formulated at the microscopic level-the level of the individual investor. We contrast macroscopic market behaviour arising from heterogenous as ...
... a math-ematical bias stemming from one of the as-sumptions underlying the capital asset prici... more ... a math-ematical bias stemming from one of the as-sumptions underlying the capital asset pricingmodel (CAPM). ... Clearly, the length of the "true" in-vestment horizon affects asset prices under con ... In the various empirical tests, the investment horizon has been selected arbitrarily ...
While Stochastic Dominance has been employed in various forms as early as 1932, it has only been ... more While Stochastic Dominance has been employed in various forms as early as 1932, it has only been since 1969-1970 that the notion has been developed and extensively employed in the area of economics, finance, agriculture, statistics, marketing and operations research. In ...
PLoS Neglected Tropical Diseases is an open-access journal publishing peer-reviewed research on t... more PLoS Neglected Tropical Diseases is an open-access journal publishing peer-reviewed research on the world\'s most neglected tropical diseases, such as elephantiasis, river blindness, leprosy, hookworm, schistosomiasis, and African sleeping sickness.
DIVERSIFICATION, PORTFOLIO ANALYSIS AND THE UNEASY CASE FOR CONGLOMERATE MERGERS Наш Levy* and Ma... more DIVERSIFICATION, PORTFOLIO ANALYSIS AND THE UNEASY CASE FOR CONGLOMERATE MERGERS Наш Levy* and Marshall SarnatI That horizontal and vertical mergers potentially can produce real economic gains is nowhere denied, but the economic case for a ...
... 2 The coefficient of correlation between railroad and public utility stock prices was 0.10 fo... more ... 2 The coefficient of correlation between railroad and public utility stock prices was 0.10 for the ... in year t. The returns have been calculated in dol-lars and, therefore, the indices have been ... raising the given portfolio return by half a percent and repeating the computation procedure ...
Microscopic Simulation (MS) uses a computer to represent and keep track of individual ("micr... more Microscopic Simulation (MS) uses a computer to represent and keep track of individual ("microscopic") elements in order to investigate complex systems which are analytically intractable. A methodology that was developed to solve physics problems, MS has been used to study the relation between microscopic behavior and macroscopic phenomena in systems ranging from those of atomic particles, to cars, animals, and even humans. In finance, MS can help explain, among other things, the effects of various elements of investor behavior on market dynamics and asset pricing. It is these issues in particular, and the value of an MS approach to finance in general, that are the subjects of this book. The authors not only put their work in perspective by surveying traditional economic analyses of investor behavior, but they also briefly examine the use of MS in fields other than finance. Most models in economics and finance assume that investors are rational. However, experimental studies reveal systematic deviations from rational behavior. How can we determine the effect of investors' deviations from rational behavior on asset prices and market dynamics? By using Microscopic Simulation, a methodology originally developed by physicists for the investigation of complex systems, the authors are able to relax classical assumptions about investor behavior and to model it as empirically and experimentally observed. This rounded and judicious introduction to the application of MS in finance and economics reveals that many of the empirically-observed "puzzles" in finance can be explained by investors' quasi-rationality. Researchers use the book because it models heterogeneous investors, a group that has proven difficult to model. Being able to predict how people will invest and setting asset prices accordingly is inherently appealing, and the combination of computing power and statistical mechanics in this book makes such modeling possible. Because many finance researchers have backgrounds in physics, the material here is accessible. Emphasizes investor behavior in determining asset prices and market dynamics Introduces Microscopic Simulation within a simplified framework Offers ways to model deviations from rational decision-making
We present a model of the stock market based on the behavior of individual investors. Simulations... more We present a model of the stock market based on the behavior of individual investors. Simulations exhibit rich phenomena which include cycles, booms, and crashes. Low dividend yield and more homogeneous market participants are shown to induce crashes.
Microscopic Simulation (MS) uses a computer to represent and keep track of individual (" mic... more Microscopic Simulation (MS) uses a computer to represent and keep track of individual (" microscopic") elements in order to investigate complex systems which are analytically intractable. A methodology that was developed to solve physics problems, MS has been used to study the relation between microscopic behavior and macroscopic phenomena in systems ranging from those of atomic particles, to cars, animals, and even humans. In finance, MS can help explain, among other things, the effects of various elements of ...
Although the representative individual framework has been shown to be generally illegitimate and ... more Although the representative individual framework has been shown to be generally illegitimate and erroneous, it continues to be widely used for lack of a more suitable approach. In this paper, we present an alternative methodology for economic study-the microscopic simulation (MS) approach. We employ the MS methodology to study a basic model of the stock market formulated at the microscopic level-the level of the individual investor. We contrast macroscopic market behaviour arising from heterogenous as ...
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