Stylized Facts and Agent-Based Modeling

TL;DR

This paper reviews stylized facts in financial data and discusses agent-based models that replicate these facts, introducing universal building blocks for such models to better understand financial market behaviors.

Contribution

It provides an overview of stylized facts and introduces the concept of universal building blocks for agent-based financial market models.

Findings

Stylized facts are common in financial data.

Agent-based models can replicate stylized facts.

Universal building blocks can standardize model development.

Abstract

The existence of stylized facts in financial data has been documented in many studies. In the past decade the modeling of financial markets by agent-based computational economic market models has become a frequently used modeling approach. The main purpose of these models is to replicate stylized facts and to identify sufficient conditions for their creations. In this paper we introduce the most prominent examples of stylized facts and especially present stylized facts of financial data. Furthermore, we given an introduction to agent-based modeling. Here, we not only provide an overview of this topic but introduce the idea of universal building blocks for agent-based economic market models.