On the Role of Risk Preference in Survivability

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On the Role of Risk Preference in Survivability
Using an agent-based multi-asset artificial stock market, we simulate the survival dynamics of investors with different risk preferences. It is found that the survivability of investors is closely related to their risk preferences. Among the eight types of investors considered in this paper, only the CRRA investors with RRA coefficients close to one can survive in the long run. Other types of agents are eventually driven out of the market, including the famous CARA agents and agents who base their decision on the capital asset pricing model.
Shu-Heng Chen, Ya-Chi Huang
Added 27 Jun 2010
Updated 27 Jun 2010
Type Conference
Year 2005
Where ICNC
Authors Shu-Heng Chen, Ya-Chi Huang
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