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.

• Type: Conference
• Year: 2005
• Where: ICNC
• Authors: Shu-Heng Chen, Ya-Chi Huang
• Keywords: Different Risk Preferences, ICNC 2005, Investors, Risk Preferences