Standard neoclassical economics asks what agents' actions, strategies, or expectations are in equilibrium with (consistent with) the outcome or pattern these behaviors aggregatively create. Agent-based computational economics enables us to ask a wider question: how agents' actions, strategies,...

This chapter surveys research on agent-based models used in finance. It will concentrate on models where the use of computational tools is critical for the process of crafting models which give insights into the importance and dynamics of investor heterogeneity in many financial settings.

Models with small numbers of agents have recently been simplified for direct empirical estimation. Parameters are estimated at the macro level to get a best fit to the data. However, little analysis is done at the micro level to examine the choices made by agents for forecasting rules. This...