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Title: Heterogeneous beliefs in over-the-counter markets
Authors: De Kamps, Marc
Ladley, Daniel
Simaitis, Aistis
First Published: 1-Apr-2014
Publisher: Elsevier
Citation: Journal of Economic Dynamics and Control, 2014, 41, pp. 50-68
Abstract: The behavior and stability of over-the-counter markets is of central concern to regulators. Little is known, however, about how the structure of these markets determine their properties. In this paper we consider an over-the-counter market populated by boundedly rational heterogeneous traders in which the structure is represented by a network. Stability is found to decrease as the market becomes less well connected, however, the configuration of connections has a significant effect. The presence of hubs, such as those found in scale free networks increases stability and decreases volatility whilst small-world short-cut links have the opposite effect. Volatility in the fundamental value increases market volatility, however, volatility in the riskless asset returns has an ambiguous effect.
DOI Link: 10.1016/j.jedc.2014.02.009
ISSN: 0165-1889
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2014, Elsevier. Deposited with reference to the publisher’s archiving policy available on the SHERPA/RoMEO website.
Description: The file associated with this record is embargoed until 36 months after the date of publication. The final published version may be available through the links above.
Appears in Collections:Published Articles, Dept. of Economics

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