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Rational Interacting Agents and Volatility Clustering: A New Approach

Siddiqi, Hammad (2007): Rational Interacting Agents and Volatility Clustering: A New Approach.

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Abstract

Here, we show that agents who are ex ante rational, if allowed to interact locally, may generate clustering of volatility. Hence, there is no need to reject the notion of rationality in agent based models.

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