Empirical Validation of Agent-Based Models ✶ ✶We gratefully acknowledge the very detailed and careful comments by three anonymous reviewers. Very useful feedback and comments have also been provided by Robert Axtell, Herbert Dawid, Cees Diks, and Blake LeBaron.

Abstract

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Testing fundamentalist–momentum trader financial cycles: An empirical analysis via the Kalman filter

“…A key step for future research is thus to allowing time-varying shares of traders. Specifically, such a model could allow for an endogenous change of the share of fundamentalists and momentum traders conditional on their previous performance, (see e.g., Franke, 2008;Lux, 2018;Lux & Zwinkels, 2018;Ter Ellen & Verschoor, 2017). This would also help to overcome the issue that estimates from a linear model may bias the eigenvalues toward stability (see Beaudry et al, 2017).…”

Economic forecasting with an agent-based model

“…The lack of a commonly accepted basis for the modelling of boundedly rational behaviour, however, has raised concerns about the ''wilderness of bounded rationality'' (Sims, 1980). Research on the econometric estimation of ABMs has been growing recently, though most of it still remains at the level of proof of concept (Lux and Zwinkels, 2018). Empirical validation of ABMs remains a difficult task.…”

Artificial Populations in Agent-Based Modeling

“…AM is capable of capturing heterogeneity, allowing for a more detailed representation of individual behavior and interactions. This detailed approach can be used to study anti-epidemic measures [17,18,19], assess the impact on different population groups [20], and conduct sensitivity analysis of modeling results to changes in parameter values [21]. However, the detailed nature of AM adds complexity to the overall modeling task and, if not managed properly, can result in overly complex models with redundant parameters.…”