Ulrich Horst (British Columbia)
Non-Ergodic Behavior in a Financial Market With Interacting Investors
Abstract
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We identify possible long-run market shares and the long-run asset price dynamics of financial markets with heterogeneous interacting agents. This involves stability conditions for a class of difference equation in a random environment, where the random environment is endogenously generated by agents' investment behavior. Depending on the evaluation of a performance measure of an investment, asset prices may behave in a non-ergodic manner.
That is, the price processes converge in distribution, but the limiting distribution is not necessarily uniquely determined. The long-run market shares of two competing financial mediators may strongly depend on the random environment which is endogenously generated by a noise traders.
The paper is available at: http://www.math.ubc.ca/~horst
Economics Colloquia.
Information: Mikhail Anufriev: M.Anufriev@uva.nl
