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Convex incentives i...
Convex incentives in financial markets: an agent-based analysis
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Fabretti, Annalisa (författare)
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- Gärling, Tommy, 1941 (författare)
- Gothenburg University,Göteborgs universitet,Psykologiska institutionen,Centrum för finans,Department of Psychology,Centre for Finance
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Herzel, Stefano (författare)
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- Holmén, Martin, 1966 (författare)
- Gothenburg University,Göteborgs universitet,Institutionen för nationalekonomi med statistik,Centrum för finans,Department of Economics,Centre for Finance
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(creator_code:org_t)
- 2017-10-05
- 2017
- Engelska.
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Ingår i: Decisions in Economics and Finance. - : Springer Science and Business Media LLC. - 1593-8883 .- 1129-6569. ; 40:1-2, s. 375-395
- Relaterad länk:
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https://gup.ub.gu.se...
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https://doi.org/10.1...
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Abstract
Ämnesord
Stäng
- © 2017, Springer-Verlag Italia S.r.l. We investigate whether convex incentive contracts are a source of instability of financial markets as indicated by the results of a continuous double-auction asset market experiment performed by Holmen et al. (J Econ Dyn Control 40:179–194, 2014). We develop a model to replicate the setting of the experiment and perform an agent-based simulation where agents have linear or convex incentives. Extending the simulation by varying features of actual asset markets that were not studied in the experiment, our main results show that increasing the number of convex incentive contracts increases prices and volatility and decreases market liquidity, measured both as bid–ask spreads and volumes. We also observe that the influence of risk aversion on traders’ decisions decreases when there are convex contracts and that increasing the differences in initial wealth among the traders has similar effects as increasing number of convex incentive contracts.
Ämnesord
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Nyckelord
- Agent-based simulations
- Incentives
- Market instability
Publikations- och innehållstyp
- ref (ämneskategori)
- art (ämneskategori)
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