Statistical Verification of the Multiagent Model of Volatility Clustering on Financial Markets

Volatility clustering and leptocurtic, heavy tailed distribution of financial asset returns have been puzzling economists for decades. Ghoulmie, Cont, and Nadal (2005) proposed an agent-based model attempting to reproduce these stylized facts bymeans of the threshold switching behavior of investors. We investigate properties of the model following principles of the design of simulation experiments. We find the results to be only partially consistent with properties of empirical time series. This suggests the model to be an insightful but incomplete description of the phenomena under study.