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Title: Endogenous price bubbles in a multi-agent system of the housing market
Authors: Roy Kouwenberg
Remco C.J. Zwinkels
Mahidol University
Vrije Universiteit Amsterdam
Tinbergen Institute - TI
Keywords: Agricultural and Biological Sciences;Biochemistry, Genetics and Molecular Biology;Medicine
Issue Date: 24-Jun-2015
Citation: PLoS ONE. Vol.10, No.6 (2015)
Abstract: © 2015 Kouwenberg, Zwinkels. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permitsunrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Economic history shows a large number of boom-bust cycles, with the U.S. real estate market as one of the latest examples. Classical economic models have not been able to provide a full explanation for this type of market dynamics. Therefore, we analyze home prices in the U.S. using an alternative approach, a multi-agent complex system. Instead of the classical assumptions of agent rationality and market efficiency, agents in the model are heterogeneous, adaptive, and boundedly rational. We estimate the multi-agent system with historical house prices for the U.S. market. The model fits the data well and a deterministic version of the model can endogenously produce boom-and-bust cycles on the basis of the estimated coefficients. This implies that trading between agents themselves can create major price swings in absence of fundamental news. Copyright:
ISSN: 19326203
Appears in Collections:Scopus 2011-2015

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