TY - JOUR

T1 - Evaluation of transaction risks of mean variance model under identical variance of the rate of return - Simulation in artificial market

AU - Ishiyama, Ko

AU - Komuro, Shusuke

AU - Tanuma, Hideki

AU - Koyama, Yusuke

AU - Deguchi, Hiroshi

PY - 2005

Y1 - 2005

N2 - Mean Variance (MV) model has spread through institutional investors as one of the most typical diversified investment model. MV model defines the investment risks with the variance of the rate of return. Therefore, if any variances of two portfolios are equal, MV model will judge that the investment risks are identical. However, even if variances are equal, two different risk cases will occur. One is just depended on market volume. The other is fully depended on speculators who raise stock prices when institutional investors are purchasing stocks. Consequently, the latter makes institutional investors pay excessive transaction costs. Development of ABM (Agent Based Modeling) in recent years makes it possible to analyze this kind of problem by simulation. In this paper, we formulate a financial market model where institutional investors and speculators trade twenty stocks simultaneously. Results of simulation show that even if variances are equal, investment risks are not identical.

AB - Mean Variance (MV) model has spread through institutional investors as one of the most typical diversified investment model. MV model defines the investment risks with the variance of the rate of return. Therefore, if any variances of two portfolios are equal, MV model will judge that the investment risks are identical. However, even if variances are equal, two different risk cases will occur. One is just depended on market volume. The other is fully depended on speculators who raise stock prices when institutional investors are purchasing stocks. Consequently, the latter makes institutional investors pay excessive transaction costs. Development of ABM (Agent Based Modeling) in recent years makes it possible to analyze this kind of problem by simulation. In this paper, we formulate a financial market model where institutional investors and speculators trade twenty stocks simultaneously. Results of simulation show that even if variances are equal, investment risks are not identical.

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U2 - 10.1007/978-3-540-30583-5_5

DO - 10.1007/978-3-540-30583-5_5

M3 - Conference article

AN - SCOPUS:26844498445

VL - 3397

SP - 42

EP - 49

JO - Lecture Notes in Computer Science

JF - Lecture Notes in Computer Science

SN - 0302-9743

T2 - 13th International Conference on AIS 2004

Y2 - 4 October 2004 through 6 October 2004

ER -