We run a laboratory experiment that contributes to the finance literature on "return chasing behavior" studying how investors switch between mutual funds driven by past performance of the funds. The subjects in this experiment make discrete choices between several (2, 3 or 4) experimental funds...

Recent turmoil on global financial markets has led to a discussion on which policy measures should or could be taken to stabilize financial markets. One such a measure that resurfaced is the imposition of short-selling constraints. It is conjectured that these short-selling constraints reduce...

This paper stresses the importance of heterogeneity in learning rules. We introduce an evolutionary competition between different learning rules and demonstrate that, though these rules can coexist, their convergence properties are strongly affected by heterogeneity. We consider a Bertrand...

We provide explanations for the results of the Levy, Levy and Solomon model, a recent simulation model of financial markets. These explanations are based upon mathematical analysis of a dynamic model of a market with an arbitrary number of heterogeneous investors allocating their wealth between...

An agent-based model of a simple financial market with arbitrary number of traders having relatively general behavioral specifications is analyzed. In a pure exchange economy with two assets, riskless and risky, trading takes place in discrete time under endogenous price formation setting....

We study the co-evolution of asset prices and agents' wealth in a financial market populated by an arbitrary number of heterogeneous, boundedly rational investors. We model assets' demand to be proportional to agents' wealth, so that wealth dynamics can be used as a selection device. For a...

This paper demonstrates how both quantitative and qualitative results of a general, analytically tractable asset-pricing model in which heterogeneous agents behave consistently with a constant relative risk aversion assumption can be applied to the special cases of optimizing behavior. The...

The dynamics in a financial market with heterogeneous agents is analyzed under different market architectures. We start with a tractable behavioral model under Walrasian market clearing and simulate it under more realistic trading protocols. The key behavioral feature of the model is the...

The time evolution of aggregate economic variables, such as stock prices, is affected by market expectations of individual investors. Neo-classical economic theory assumes that individuals form expectations rationally, thus enforcing prices to track economic fundamentals and leading to an...