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A kinetic description of the impact of agent competence and psychological factors on investment decision-making |
Chunhua Hu(胡春华)1,† and Hongjing Chen(陈弘婧)2 |
1. School of Economics, Southwest Minzu University, Chengdu 610041, China; 2. School of Statistics, Chengdu University of Information Technology, Chengdu 610103, China |
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Abstract The kinetic theory is employed to analyze influence of agent competence and psychological factors on investment decision-making. We assume that the wealth held by agents in the financial market is non-negative, and agents set their own investment strategies. The herding behavior is considered when analyzing the impact of an agent's psychological factors on investment decision-making. A nonlinear Boltzmann model containing herding behavior, agent competence and irrational behavior is employed to investigate investment decision-making. To characterize the agent's irrational behavior, we utilize a value function which includes current and ideal-investment decisions to describe the agent's irrational behavior. Employing the asymptotic procedure, we obtain the Fokker-Planck equation from the Boltzmann equation. Numerical results and the stationary solution of the obtained Fokker-Planck equation illustrate how herding behavior, agent competence, psychological factors, and irrational behavior affect investment decision-making, i.e., herding behavior has both advantages and disadvantages for investment decision-making, and the agent's competence to invest helps the agent to increase income and to reduce loss.
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Received: 17 February 2023
Revised: 03 April 2023
Accepted manuscript online: 07 April 2023
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PACS:
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89.65.Gh
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(Economics; econophysics, financial markets, business and management)
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47.45.Ab
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(Kinetic theory of gases)
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05.20.Dd
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(Kinetic theory)
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05.10.Gg
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(Stochastic analysis methods)
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Fund: Project supported by the Fundamental Research Funds for the Central Universities and Southwest Minzu University (Grant No.2022SJQ002). |
Corresponding Authors:
Chunhua Hu
E-mail: chunhuahu@swun.edu.cn
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Cite this article:
Chunhua Hu(胡春华) and Hongjing Chen(陈弘婧) A kinetic description of the impact of agent competence and psychological factors on investment decision-making 2023 Chin. Phys. B 32 088901
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