Model of Heterogeneous Agents and Noise Traders’ Risk: A Case of Conceptual Framework

Asrat Araya; Dr. Jauhari Dahalan, Dr. Barudin Muhammad


Purpose: This paper aims to review the market assets bubble and demonstrate how this asset bubble is related to the financial market, including the housing market, using a heterogeneous agent model.

Design/ Method/ Approach: Our approach to this work is first, review the market asset bubbles, which includes its history, second review the diverse processes of assets bubble in the financial markets, including the housing market.

Findings: Since this paper is a conceptual approach toward the market asset bubbles, the heterogeneous agent-based system under the noisy rational expectation equilibrium model has been discussed.

Research limitations: The studies of market asset bubbles are abundant; however, most of the properties of the models under rational expectation equilibrium can fully capture the elements of market asset bubbles. Similarly, our paper has this inherent research limitation, too, for which much work is needed in this area of study.

Practical implications: This reviewed work of ours will impact the market asset bubbles regarding the heterogeneous model used here since works related to applying this model in the asset markets are limited.

FULL TEXT PDF 1-10 ] DOI: 10.30566/ijo-bs/2021.12.70

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