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Evaluation of Transaction Risks of Mean Variance Model Under Identical Variance of the Rate of Return – Simulation in Artificial Market

  • Ko Ishiyama
  • Shusuke Komuro
  • Hideki Tanuma
  • Yusuke Koyama
  • Hiroshi Deguchi
Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 3397)

Abstract

Mean Variance (MV) model has spread through institutional investors as one of the most typical diversified investment model. MV model defines the investment risks with the variance of the rate of return. Therefore, if any variances of two portfolios are equal, MV model will judge that the investment risks are identical. However, even if variances are equal, two different risk cases will occur. One is just depended on market volume. The other is fully depended on speculators who raise stock prices when institutional investors are purchasing stocks. Consequently, the latter makes institutional investors pay excessive transaction costs. Development of ABM (Agent Based Modeling) in recent years makes it possible to analyze this kind of problem by simulation. In this paper, we formulate a financial market model where institutional investors and speculators trade twenty stocks simultaneously. Results of simulation show that even if variances are equal, investment risks are not identical.

Keywords

Stock Market Transaction Cost Institutional Investor Market Spot Identical Variance 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. [Deguchi, 2004]
    Deguchi, H., Tanuma, H., Shimizu, T.: SOARS: Spot Oriented Agent Role Simulator. Design and Agent Based Dynamical System -. In: Proceedings of the Third International Workshop on Agent-based Approaches in Economic and Social Com-plex Systems (AESCS 2004), pp. 57–64 (2004)Google Scholar
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    Ishinishi, M., Deguchi, H., Kita, H.: Study on a Dynamic Resource Allocation for Communication Network Based on a Market-based Model. In: Proceedings of the Second International Workshop on Agent-based Approaches in Economic and Social Complex Systems (AESCS 2002), pp. 47–54 (2002)Google Scholar
  3. [Konno, 2001]
    Konno, H., Wijayanayake, A.: Optimal Rebalancing under Concave Transaction Costs and Minimal Transaction Units Constraint. Mathematical Programming 89, 233–250 (2001)zbMATHCrossRefMathSciNetGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2005

Authors and Affiliations

  • Ko Ishiyama
    • 1
  • Shusuke Komuro
    • 2
  • Hideki Tanuma
    • 3
  • Yusuke Koyama
    • 1
  • Hiroshi Deguchi
    • 1
  1. 1.Interdisciplinary Graduate School of Science and EngineeringTokyo Institute of Technology 
  2. 2.Department of Industrial and Systems EngineeringChuo University 
  3. 3.The Institute of Medical ScienceThe University of Tokyo 

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