The Hesitation of Anxious Traders in an Agent-Based Model

Table 3

Simulations for the upper bound of irrationality. Note: In this table, by focusing on the upper bound of irrationality in agent evolutions, we dissect deviations from the fundamental information, market proportions of anxious agents, the benefit of the anxious agents’ strategy, the difference in the benefit between the anxious and fundamentalist agents, and the momentum strength. The magnitudes of the lack of confidence and behavioral hesitation (denoted by d) are 1, 3, and 5, respectively. When d equals 1, the expectation for price of the anxious agent can be written as . Hence, the anxious agent does not embody hesitation since the agent only relies on the single-period forecast error in such a case. However, hesitation begins to emerge if d is 2 or over 2 since the agent refers to multiperiod forecast errors. The upper bounds are 0.01, 0.05, 0.1, 0.2, and 0.5, respectively. In order to ensure the accuracy of statistical inference, we thus follow Gatti and Grazzini [88] and García-Magariño et al. [1, 8]] to perform a one-sample t-test for each simulation window. Equipped with such endeavors, we proceed to calculate the averages of the t-statistics across windows.

	Deviations		Anxious agents’ proportions		Anxious agents’ benefit		Anxious agents’ benefit minus fundamentalist agents’ benefit		Momentum strength
U	Mean	t (mean)	Mean	t (mean)	Mean	t (mean)	Mean	t (mean)	Mean	t (mean)
Panel A: d = 1
0.01	−0.836	−2.921	0.542	3.957	0.003	4.236	0.087	5.662	−0.305	−4.939
0.05	−0.849	−2.965	0.542	3.977	0.003	4.214	0.087	5.639	−0.303	−4.910
0.1	−0.852	−2.994	0.543	4.015	0.003	4.278	0.088	5.687	−0.305	−4.947
0.2	−0.846	−2.964	0.543	4.061	0.003	4.305	0.089	5.775	−0.311	−5.046
0.5	−0.853	−2.986	0.542	3.992	0.003	4.234	0.087	5.637	−0.301	−4.869
Panel B: d = 3
0.01	−0.931	−3.214	0.541	3.842	−5.45E − 05	−0.055	0.084	5.496	−0.179	−2.502
0.05	−0.945	−3.240	0.540	3.769	−2.28E − 05	−0.017	0.081	5.289	−0.177	−2.475
0.1	−0.939	−3.236	0.541	3.853	−1.76E − 05	−0.012	0.083	5.410	−0.182	−2.561
0.2	−0.947	−3.247	0.540	3.765	−2.67E − 05	−0.023	0.080	5.238	−0.172	−2.408
0.5	−0.935	−3.205	0.540	3.813	−1.92E − 05	−0.014	0.082	5.317	−0.172	−2.398
Panel C: d = 5
0.01	−0.952	−3.275	0.540	3.741	−0.0003	−0.372	0.081	5.303	−0.122	−1.653
0.05	−0.979	−3.353	0.540	3.760	−0.0003	−0.378	0.081	5.263	−0.120	−1.619
0.1	−0.953	−3.265	0.540	3.776	−0.0003	−0.345	0.081	5.260	−0.127	−1.722
0.2	−0.960	−3.282	0.540	3.812	−0.0003	−0.370	0.082	5.311	−0.112	−1.514
0.5	−0.955	−3.280	0.541	3.860	−0.0003	−0.375	0.083	5.398	−0.119	−1.621