| Title | How Market Intervention can Prevent Bubbles and Crashes: An Agent Based Modelling Approach |
| Author | |
| Corresponding Author | Westphal, Rebecca |
| Publication Years | 2023-09-01
|
| DOI | |
| Source Title | |
| ISSN | 0927-7099
|
| EISSN | 1572-9974
|
| Abstract | Using a previously validated agent-based model with fundamentalists and chartists, we investigate the usefulness and impact of direct market intervention. The policy maker diagnoses bubbles by forming an expectation of the future returns, then invests in burgeoning bubbles to develop a sufficient inventory of the risky asset in order to be able to sell adequate amounts of the overpriced asset later countercyclically to fight market exuberance. Preventing bubbles and crashes, this market intervention improves all analysed market return metrics, volatility, skewness, kurtosis and VaR, without affecting long-term growth. This increases the Sharpe ratios of noise traders and of fundamentalists by approximately 28% and 45% respectively. The results are robust even for substantially miscalibrated long-term expected returns. |
| Keywords | |
| URL | [Source Record] |
| Indexed By | |
| Language | English
|
| SUSTech Authorship | Others
|
| WOS Research Area | Business & Economics
; Mathematics
|
| WOS Subject | Economics
; Management
; Mathematics, Interdisciplinary Applications
|
| WOS Accession No | WOS:001075005200001
|
| Publisher | |
| Data Source | Web of Science
|
| Citation statistics |
Cited Times [WOS]:0
|
| Document Type | Journal Article |
| Identifier | http://kc.sustech.edu.cn/handle/2SGJ60CL/575868 |
| Department | Academy for Advanced Interdisciplinary Studies |
| Affiliation | 1.Swiss Fed Inst Technol, Dept Management Technol & Econ, Scheuchzerstr 7, CH-8092 Zurich, Switzerland 2.Southern Univ Sci & Technol, Acad Adv Interdisciplinary Studies, Inst Risk Anal Predict & Management, Shenzhen 518055, Peoples R China 3.Tokyo Inst Technol, Tokyo Tech World Res Hub Initiat WRHI, Inst Innovat Res, Tokyo, Japan |
| Recommended Citation GB/T 7714 |
Westphal, Rebecca,Sornette, Didier. How Market Intervention can Prevent Bubbles and Crashes: An Agent Based Modelling Approach[J]. COMPUTATIONAL ECONOMICS,2023.
|
| APA |
Westphal, Rebecca,&Sornette, Didier.(2023).How Market Intervention can Prevent Bubbles and Crashes: An Agent Based Modelling Approach.COMPUTATIONAL ECONOMICS.
|
| MLA |
Westphal, Rebecca,et al."How Market Intervention can Prevent Bubbles and Crashes: An Agent Based Modelling Approach".COMPUTATIONAL ECONOMICS (2023).
|
| Files in This Item: | There are no files associated with this item. | |||||
Items in the repository are protected by copyright, with all rights reserved, unless otherwise indicated.
;
Edit Comment