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J. Open Innov. Technol. Mark. Complex. 2015, 1(1), 11; https://doi.org/10.1186/s40852-015-0014-8 (registering DOI)

RESEARCH Open Access Heterogeneous expectations leading to bubbles and crashes in asset markets: tipping point, herding behavior and group effect in an agent-based model

Department of Economics, Seoul National University, Seoul, South Korea
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Received: 6 August 2015 / Accepted: 25 August 2015 / Published: 15 September 2015
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Abstract

This paper develops an agent-based model(ABM) to replicate financial instability, such as bubbles and crashes in asset markets, by introducing a simple idea of ‘heterogeneous expectation’ by which agents have different expectations about a ‘tipping point’ where they expect the price to stop rising anymore but to begins to fall. An ABM in this paper also verifies the impact of the herding behavior by dividing agents into several groups of varying sizes but with the same expectations. By changing the size or the number of groups, it establishes that the more agents share the same expectations about the tipping point, the higher volatility of the asset price emerges.
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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Lee, S.; Lee, K. RESEARCH Open Access Heterogeneous expectations leading to bubbles and crashes in asset markets: tipping point, herding behavior and group effect in an agent-based model. J. Open Innov. Technol. Mark. Complex. 2015, 1, 11.

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