Empirical validation of stochastic models of interacting agents

The present paper expands on recent attempts at estimating the parameters of simple interacting-agent models of financial markets [S. Alfarano, T. Lux, F. Wagner, Computational Economics 26, 19 (2005); S. Alfarano, T. Lux, F. Wagner, in Funktionsf?higkeit und Stabilit?t von Finanzm?rkten, edited by W. Franz, H. Ramser, M. Stadler (Mohr Siebeck, Tübingen, 2005), pp. 241–254]. Here we provide additional evidence by (i) investigating a large sample of individual stocks from the Tokyo Stock Exchange, and (ii) comparing results from the baseline noise trader/fundamentalist model of [S. Alfarano, T. Lux, F. Wagner, Computational Economics 26, 19 (2005)] with those obtained from an even simpler version with a preponderance of noise trader behaviour. As it turns out, this somewhat more parsimonious “maximally skewed” variant is often not rejected in favor of the more complex version. We also find that all stocks are dominated by noise trader behaviour irrespective of whether the data prefer the skewed or the baseline version of our model.