"A Heterogeneous Agents Model with a Market Maker: Theory and Evidence"



This paper empirically estimates a heterogeneous agents model with a market maker using S&P 500 data. Fundamentalists expect mean reversion while chartists condition expectation on a geometric decay process. Results indicate that the market is populated with fundamentalists and chartists, and that agents switch between these groups. Furthermore, the inclusion of a market maker proves to be beneficial compared to a Walrasian auctioneer.
The Brown Bag Seminars are sponsored by ERIM.
Contact information:
Sebastian Gryglewicz