Munich Personal RePEc Archive

Knowledge, Preferences and Shocks in Portfolio Analysis

Steinbacher, Matjaz (2009): Knowledge, Preferences and Shocks in Portfolio Analysis.

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Abstract

We simulate social network games of a portfolio selection to analyze how knowledge, preferences of agents and their level of omniscience affect their decision-making. The key feature of the paper is that preferences and the level of omniscience of agents very much determine the ways agents make their decision. While omniscient agents respond very rapidly to the changing market conditions, non-omniscient agents are more resistant to such changes. By introducing one-time shock, we found that its efficiency depends on the level of omniscience of agents, with much stronger efficiency under omniscient agents.

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