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 -