Wealth share analysis with "fundamentalist/chartist" heterogeneous agents

TL;DR

This paper develops a multi-asset model with fundamentalist and chartist agents, demonstrating how their investment strategies influence wealth distribution and market stylized facts like fat tails and volatility memory.

Contribution

It introduces a heterogeneous agents model with calibrated parameters showing how strategy memory length affects wealth shares, a novel insight into strategy impact on wealth distribution.

Findings

Longer chartist memory increases wealth share for chartists.

Mean reversion parameter does not significantly affect wealth shares.

Model reproduces stylized facts like fat tails and volatility clustering.

Abstract

We build a multiassets heterogeneous agents model with fundamentalists and chartists, who make investment decisions by maximizing the constant relative risk aversion utility function. We verify that the model can reproduce the main stylized facts in real markets, such as fat-tailed return distribution and long-term memory in volatility. Based on the calibrated model, we study the impacts of the key strategies' parameters on investors' wealth shares. We find that, as chartists' exponential moving average periods increase, their wealth shares also show an increasing trend. This means that higher memory length can help to improve their wealth shares. This effect saturates when the exponential moving average periods are sufficiently long. On the other hand, the mean reversion parameter has no obvious impacts on wealth shares of either type of traders. It suggests that no matter whether fundamentalists take moderate strategy or aggressive strategy on the mistake of stock prices, it will have no different impact on their wealth shares in the long run.