Rational Interacting Agents and Volatility Clustering: A New Approach

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

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.

• Item Type: MPRA Paper
• Institution: Lahore University of Management Sciences
• Language: English
• Keywords: Volatility Clustering; Rationality; Local Interactions
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets

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