TY  - GEN
AB  - This paper establishes an agent-based model to describe the dynamic behaviour
of the financial market with mutual fund managers and investors under two types
of compensation contracts: asset-based fees and performance-based fees, and using
two types of adaptive expectation: trend chaser and contrarian. Our results show
that both of trading strategies of trend chaser and contrarian destabilise the market.
However, trend chasers always trigger significant fluctuations, while contrarian
traders bring along the slight up and down oscillations. The types of compensation
contracts change the behaviour of contrarian traders, but have no influence to trend
chaser. We also find that inertia parameter decrease the stability of market and induce
market price to be underestimated. In particular, the heterogenous analysis
under different compensation contracts shows that asset maximisers dominate the
whole market and produce higher returns, which can be used to explain the current
situation in real market that most of mutual funds choose asset-based contract.
Moreover, the coexistence of two compensation schemes may amplify market fluctuations
and create bubbles.
DA  - 2015
DO  - 10.4119/unibi/2915574
KW  - mutual fund manager
KW  - compensation contract
KW  - bounded rationality
KW  - adaptive expectation
KW  - nonlinear dynamics
KW  - risk taking behaviour
KW  - heterogenity
LA  - eng
PY  - 2015
SN  - 2196-2723
SP  - 37-
TI  - Incentives and Adaptive Expectations in a Financial Market with Heterogenous Agents
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29155748
Y2  - 2024-11-22T05:05:15
ER  -