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Journal of Applied Economics Volume 26, 2023 - Issue 1
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Macroeconomics and Monetary Policy

The impact of active and passive investment on market efficiency: a simulation study

Patrick JaquartInstitute of Information Systems and Marketing, Karlsruhe Institute of Technology, Karlsruhe, GermanyCorrespondence[email protected]
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,
Marvin MotzInstitute of Information Systems and Marketing, Karlsruhe Institute of Technology, Karlsruhe, GermanyView further author information
,
Lutz KöhlerInstitute of Information Systems and Marketing, Karlsruhe Institute of Technology, Karlsruhe, GermanyView further author information
&
Christof WeinhardtInstitute of Information Systems and Marketing, Karlsruhe Institute of Technology, Karlsruhe, GermanyView further author information
Article: 2188634 | Received 06 Jul 2022, Accepted 26 Feb 2023, Published online: 15 Mar 2023

Figures & data

Table 1. Overview of parameter choices in the standard market setting.

Figure 1. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the standard setting.

Figure 1. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the standard setting.

Table 2. Fundamental price deviation and trading volume for different investor compositions in the standard setting averaged over all random seeds.

Table 3. Fundamental price deviation and trading volume for different investor compositions in the market settings with a share of 40 percent and 90 percent random investment averaged over all random seeds.

Table 4. Mean absolute changes of portfolio weights between simulation rounds by agent type and agent composition.

Figure 2. Relative fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with 40 percent random investment.

Figure 2. Relative fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with 40 percent random investment.

Figure 3. Relative fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with 90 percent random investment.

Figure 3. Relative fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with 90 percent random investment.

Figure 4. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market settings with active investors’ individual absolute target price forecasting errors (aTPE) of 0.225 and 0.9.

Figure 4. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market settings with active investors’ individual absolute target price forecasting errors (aTPE) of 0.225 and 0.9.

Table 5. Relative fundamental price deviation for different investor compositions in the market settings with active investors’ individual absolute target price forecasting errors (aTPE) of 0.225 and 0.9 averaged over all random seeds.

Figure 5. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with individual investors’ risk aversion of γ=2 and γ=6.

Figure 5. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with individual investors’ risk aversion of γ=2 and γ=6.

Table 6. Relative fundamental price deviation for different investor compositions in the market settings with individual investors’ risk aversion of γ=2 and γ=6 averaged over all random seeds.

Figure 6. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with 0.5% transaction costs.

Figure 6. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with 0.5% transaction costs.

Table 7. Fundamental price deviation and trading volume for different investor compositions in the market setting with 0.5 percent transaction cost averaged over all random seeds.

Figure 7. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with individual investors’ upper portfolio constraints of 0.33 and 1.

Figure 7. Fundamental price deviation by fraction of active investors (relative to all active and passive investors) detailed over all random seeds in the market setting with individual investors’ upper portfolio constraints of 0.33 and 1.

Table 8. Fundamental price deviation and trading volume for different investor compositions in the market setting with individual investors’ upper portfolio constraints of wmax=0.33 and wmax=1 averaged over all random seeds.

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