A time-dependent Preisach model

Cross, Rod; Krasnoselʹskiǐ, A. M.; Pokrovskiǐ, Aleksei V.

doi:10.1016/s0921-4526(01)01005-5

Cited by 31 publications

(16 citation statements)

References 2 publications

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“…The above modeling of the inaction tension can be regarded as a form of hysteresis [10]. Resetting the price of the i th investor has the effect of introducing a price range within which that investor is comfortable with their current position (ignoring, of course, the cowardice tension).…”

Section: The Modelmentioning

confidence: 99%

A threshold model of investor psychology

Cross

Grinfeld

Lamba

et al. 2005

Physica A: Statistical Mechanics and its Applications

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We introduce a class of agent-based market models founded upon simple descriptions of investor psychology. Agents are subject to various psychological tensions induced by market conditions, and endowed with a minimal 'personality'. This personality consists of a threshold level for each of the tensions being modeled, and the agent reacts whenever a tension threshold is reached. This paper considers an elementary model including just two such tensions. The first is 'cowardice', which is the stress caused by remaining in a minority position with respect to overall market sentiment, and leads to herding-type behaviour. The second is 'inaction', which is the increasing desire to act or re-evaluate one's investment position. There is no inductive learning by agents, and they are only coupled via the global market price and overall market sentiment. Even incorporating just these two psychological tensions, important stylized facts of real market data, including fat-tails, excess kurtosis, uncorrelated price returns and clustered volatility over the timescale of a few days, are reproduced. By then introducing an additional parameter that amplifies the effect of externally generated market noise during times of extreme market sentiment, long-time volatility correlations can also be recovered.

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Section: The Modelmentioning

confidence: 99%

A threshold model of investor psychology

Cross

Grinfeld

Lamba

et al. 2005

Physica A: Statistical Mechanics and its Applications

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“…A simple hysteretic model of firm-switching activity is constructed in Section 2 to explain how hysteresis can arise within Okun's relation. In Section 3, we draw our inspiration from the procedure for testing hysteretic specifications due to Cross et al (2001) (2002). On this basis, we build our own algorithm that allows for the construction of hysteretic variables, and apply empirical tests to determine whether our hysteretic version of Okun's Law out-performs the standard, linear alternative.…”

Section: Lang and C De Perettimentioning

confidence: 99%

“…This implies using a procedure that allows for the construction of 'h' functions. Cross et al (2001) have developed such a procedure, divided in four steps. The first step is to define the vertex of the right-angled triangle over the 45 degrees straight line (a 0 , b 0 ).…”

Section: Empirical Implementationmentioning

confidence: 99%

“…In Cross et al (2001), the procedure described above is developed analytically only in the case where f(a,b) is uniform, because deriving the procedure analytically for other density functions can cause serious difficulties. Therefore, we have developed a slightly different procedure.…”

Section: Empirical Implementationmentioning

confidence: 99%

“…To define the vertex of the right-angled triangle over the 45 degrees straight line, Mayergoyz (1991) defines (a 0 , b 0 ) such that a 0 = max{a,(a,b) ∈ T} and b 0 = min{b, (a,b) ∈ T}, where T stands for the right-angled triangle. As it is not possible to know (a 0 , b 0 ) empirically, following Cross et al (2001), we build this triangle by assuming that a 0 = max{g(t),t = 1,2,…,t max } and b 0 =min{g(t),t = 1,2,…,t max }. At the beginning of the program, we start from a maximum employment situation, that is, a situation where all firms are active.…”

Section: Empirical Implementationmentioning

confidence: 99%

See 2 more Smart Citations

A strong hysteretic model of Okun’s Law: theory and a preliminary investigation

Lang

Peretti

2009

International Review of Applied Economics

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This paper presents a ‘strong hysteretic’ version of Okun’s Law, that is, a version of the law in which ‘history matters.’ In this version of the link between fluctuations in unemployment and growth, the most important past growth shock exerts an influence on the current unemployment rate. A theoretical framework is proposed in order to lay the foundations of this version of Okun’s Law. In this framework, the hysteresis property arises because a large number of heterogeneous firms discontinuously adjust their activity levels in response to fluctuations in the rate of growth. The foundations having been laid, a method for empirically testing our hysteretic Okun’s Law is presented. An algorithm permits construction of a hysteresis operator, which synthesizes, for every moment, the growth shocks that have remained in the memory bank of the unemployment rate. Empirical tests are conducted to assess the empirical relevance of this version of Okun’s Law, as compared to the more familiar linear relationship. Empirical results consistent with hysteresis are found for several of the countries in our sample.Okun’s law, unemployment fluctuations, hysteresis, E24, C52, J23,

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Long Memory and Hysteresis

Peretti

2007

Long Memory in Economics

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A time-dependent Preisach model

Cited by 31 publications

References 2 publications

A threshold model of investor psychology

A threshold model of investor psychology

A strong hysteretic model of Okun’s Law: theory and a preliminary investigation

Long Memory and Hysteresis

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