What Causes Persistence of Stock Return Volatility? One Possible Explanation with an Artificial Stock Market

This paper explores the mechanism on how the persistence of the stock return volatility is created using a model of an agent-based stock market. First, artificial stock markets with different learning mechanisms, i.e., individual and social learning are examined. The simulation result shows that a social learning economy produces persistence of return volatility while an individual learning economy does not. Then, more importantly, the relation between agents’ behavior and return volatility dynamics is investigated.