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Dr David Goldbaum

Biography

David Goldbaum joined the School at the beginning of 2007. He received his Ph.D. in economics from the University of Wisconsin-Madison in 1996. His research interests include learning, adaptation, financial markets, information, and rational choice. His most recent research examines social network formation and the emergence of leaders as a social phenomenon.

David Goldbaum’s personal webpage and working papers
https://sites.google.com/site/davidhgoldbaum/

Places of Interest

Associate Professor, Economics Discipline Group
Core Member, Centre for the Study of Choice
Core Member, Quantitative Finance Research Centre
Masters of Science (Economics), Doctorate of Philosophy (Economics)
Download CV  (PDF 321 Kb, 6 pages)
Phone
+61 2 9514 7734
Room
CB05D.03.39

Research Interests

Computational Economics and Finance, Nonlinear Dynamics, Bounded Rationality and Learning, Agent-based Computational Economics, Applied Micro Theory

Can supervise: Yes

Financial Economics, Financial Investments, Futures and Options, Money and Banking, Intermediate Macroeconomics, Principles Macroeconomics

Book Chapters

Goldbaum, D. 2001, 'Price bubbles and the long run profitability of a trend following technical trading' in Alan Kirman and Jean-Benoit Zimmermann (eds), Economics with Heterogeneous Interacting Agents, Springer, Germany, pp. 183-194.
Goldbaum, D. 1999, 'Cycles of market stability and instability due to endogenous use of technical trading rules' in Yaser S. Abu-Mostafa, Blake LeBaron, Andrew W. Lo and Andrea S. Weigend (eds), Computational Finance - Proceedings of the 6th International Conference, MIT Press, USA, pp. 481-494.

Conference Papers

Al-Sharawneh, J.A., Williams, M., Wang, X. & Goldbaum, D. 2011, 'Mitigating Risk in Web-Based Social Network Service Selection: Follow the Leader', International Conference on Internet and Web Applications and Services, St. Maarten, The Netherlands Antilles, March 2011 in The Sixth International Conference on Internet and Web Applications and Services (ICIW 2011), ed Mihhail Matskin, Mark Perry and Zaigham Mahmood,, The International Academy, Research and Industry Association (IARIA), IARIA, pp. 156-164.
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In the Service Web, a huge number of Web services compete to offer similar functionalities from distributed locations. Since no Web service is risk free, this paper aims to mitigate the risk in service selection using 'Follow the Leader' principle as a new approach for risk-reducing strategy. First, we define the user credibility model based on the 'Follow the Leader' principle in web-based social networks. Next we show how to evaluate the Web service credibility based on its trustworthiness and expertise. Finally, we present a dynamic selection model to select the best service with the perceived performance risk and customer risk-attitude considerations. To demonstrate the feasibility and effectiveness of the new 'Follow the Leader' driven approach to alleviate the risk in service selection, we used a Social Network Analysis Studio (SNAS) to verify the validity of the proposed model. The empirical results incorporated in this paper, demonstrate that our approach is a significantly innovative approach as riskreducing strategy in service selection.
Goldbaum, D. 2011, 'Experiments on the emergence of social order', 17th International Conference on Computing in Economics and Finance, San Francisco, California, USA, June 2011.
Goldbaum, D. 2010, 'Follow the leader: Steady state analysis of a dynamic social network', Economic Science with Heterogeneous Interacting Agents 2010 Workshop, Alessandria, Italy, June 2010.
Goldbaum, D. 2010, 'Learning and adaptation as a source of market failure', Seminar Presentation, Department of Applied Mathematics, University of Venice, Venice, Italy, June 2010.
Goldbaum, D. & Panchenko, V. 2010, 'Learning and adaptation's impact on emergent market efficiency', 16th International Conference on Computing in Economics and Finance, London, UK, July 2010.
Al-Sharawneh, J.A., Williams, M. & Goldbaum, D. 2010, 'Web Service Reputation Prediction based on Customer Feedback Forecasting Model', Enterprise Distributed Object Computing Conference, Brazil, October 2010 in Enterprise Distributed Object Computing Conference Workshops (EDOCW), 2010 14th IEEE International, ed Juan E. Guerrero, IEEE Computer Society, NJ USA, pp. 33-40.
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In the Service Web, customers++ feedback constitutes a substantial component of Web Service reputation and trustworthiness, which in turn impacts the service uptake by consumers in the future. This paper presents an approach to predict reputation in service-oriented environments. For assessing a Web Service reputation, we define reputation key metrics to aggregate the feedback of different aspects of the ratings. In situations where rating feedback is not available, we propose a Feedback Forecasting Model (FFM), based on Expectation Disconfirmation Theory (EDT), to predict the reputation of a web service in dynamic settings. Then we introduce the concept ++Reputation Aspect+ and show how to compute it efficiently. Finally we show how to integrate the Feedback Forecasting Model into Aspect-Based Reputation Computation. To demonstrate the feasibility and effectiveness of our approach, we test the proposed model using our Service Selection Simulation Studio (4S). The simulation results included in this paper show the applicability and performance of the proposed Reputation Prediction based on the Customer Feedback Forecasting Model. We also show how our model is efficient, particularly in dynamic environments.
Goldbaum, D. 2009, 'Follow the Leader: Steady State analysis of a Dynamic Social Network', 27th Australasian Economic Theory Workshop, Auckland, New Zealand, February 2009 in 27th Australasian Economic Theory Workshop, ed Berka, M., Fabrizi, S., Lippert, S., Do, K. H. P., Reich, O. and Schumacher, C., Massey University, Auckland, New Zealand.
Goldbaum, D. 2008, 'Learning and adaption as a source of market failure', 16th Society for Nonlinear Dynamics and Econometrics Conference, San Francisco, USA, April 2008.
Goldbaum, D. 2007, 'Dissemination in an endogenous random network (or "follow the leader")', ESHIA/WEHIA 2007 - International Conference on Economic Science with Heterogeneous Interacting Agents, Fairfax, USA, June 2007.
Goldbaum, D. 2007, 'Dissemination in an endogenous random network (or "follow the leader")', 13th International Conference on Computing in Economics and Finance, Montreal, Canada, June 2007.
Goldbaum, D. 2007, 'Learning and adaptation as a source of market failure', The Paul Woolley Centre for Capital Market Dysfunctionality Conference: Investing Strategies and Financial Market Inefficiency, Sydney, Australia, October 2007.
Goldbaum, D. 2007, 'Heterogeneous beliefs in financial markets: Persistent endogenous noise and informationally efficient markets', The Society for Nonlinear Dynamics and Econometrics 15th Annual Symposium, Paris, France, March 2007.
Goldbaum, D. 2007, 'Learning and adaption as a source of market failure', The Paul Woolley Centre for Capital Market Dysfuctionality Conference: Investing Strategies and Financial Market Inefficiency, Sydney, Australia, October 2007.
Goldbaum, D. 2007, 'Dissemination in an endogenous random network (or "follow the leader")', Seminar Presentation, School of Economics, University of NSW, Sydney, Australia, May 2007.
Goldbaum, D. 2006, 'Fully revealing prices and other market anomalies', Seminar Presentation, School of Finance and Economics, University of Technology, Sydney, Sydney, Australia, April 2006.

Journal Articles

Goldbaum, D. & Panchenko, V. 2010, 'Learning and adaptation's impact on market efficiency', Journal of Economic Behavior and Organization, vol. 76, no. 3, pp. 635-653.
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A dynamic model with learning and adaptation captures the evolution in trader beliefs and trading strategies. Through a process of learning and observation, traders improve their understanding of the market. Traders also engage in a process of adaptation by switching between trading strategies based on past performance. The asymptotic properties are derived analytically, demonstrating that convergence to efficiency depends on the model of adaptation.
Goldbaum, D. 2008, 'Coordinated investing with feedback and learning', Journal of Economic Behavior and Organization, vol. 65, no. 2, pp. 202-223.
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This paper introduces assets for which the intrinsic value is endogenous to the amount of funding attracted. A rational expectations equilibrium is developed. Additionally, simulations of the model based on bounded rationality explore the different market behavior under fundamental and momentum based investing strategies. Both strategies produce herding characteristics. The herding under the fundamental strategy approximates the optimal investing of a rational central planner. The momentum strategy results in suboptimal economic development.
Goldbaum, D. & Mizrach, B. 2008, 'Estimating the Intensity of Choice in a Dynamic Mutual Fund Allocation Decision', Journal of Economic Dynamics and Control, vol. 32, no. 12, pp. 3866-3876.
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The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and obtain statistically significant estimates of the intensity of choice parameter. This estimate is also given economic interpretation through the underperformance of funds that use an active style. We find that agents with relative risk aversion of 2 will move 1% of their funds from active to passive for an extra 34 basis points of return.
Goldbaum, D. 2006, 'Self-organization and the persistence of noise in financial markets', Journal of Economic Dynamics and Control, vol. 30, no. 9-10, pp. 1837-1855.
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A dynamic model of financial markets with learning is demonstrated to produce a selforganized system that displays critical behavior. The price contains private information that traders learn to extract and employ to forecast future value. Since the price reflects the beliefs of the traders, the learning process is self-referencing. As the market learns to correctly extract information from the price, the market deemphasizes private information. despite the convergence of the model towards the parameters producing efficiency, pricing deviations remain constant due to the increased sensitivity of the price to small errors in information extraction produced by the model++s own convergence.
Goldbaum, D. 2005, 'Market efficiency and learning in an endogenously unstable environment', Journal of Economic Dynamics and Control, vol. 29, pp. 953-978.
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An informationally inefficiency market is produced without an exogenous source of noise in the price. Fundamental traders acquire private information directly through research. Regression traders employ a learning process to extract the private fundamental information from the public price. The relative popularity between these two strategies evolves based on performance. The model converges towards adoption of regression analysis to the point of creating instability, endogenously producing a noisy price. The lack of a revealing price in the coupled learning and population processes reflects the Grossman and Stiglitz (Amer. Econ. Rev. 70(3)(1980)393) impossibility of informationally efficient markets.
Goldbaum, D. 2003, 'Profitable technical trading rules as a source of price instability', Quantitative Finance, vol. 3, no. 3, pp. 220-229.
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This model incorporates technical trading rules (TTRs) that extract information from the price, allowing the users to benefit from the information. Sustainable profits are possible as long as the price movements reflect changes in the security's intrinsic value. The choice to use the TTR rather than fundamental information is endogenous to the model. Increases in the popularity of the TTR can produce price bubbles and diminish the TTR's ability to extract a reliable signal. Large fluctuations in the TTR's popularity lead to unsustainable periods of positive profits coupled with long-term losses.
Goldbaum, D. 2000, 'Life Cycle Consumption Of A Harmful And Addictive Good', Economic Inquiry, vol. 38, no. 3, pp. 458-469.
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This article demonstrates that the endogenous desire to quit smoking can result from a rational consumption path chosen at the time rite consumer begins smoking. This result is obtained without relying oil hidden costs or unknown preferences. A finite-li
Goldbaum, D. 1999, 'A Nonparametric Examination of Market Information: application to technical trading rules', Journal of Empirical Finance, vol. 6, no. 1, pp. 59-85.
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This paper develops a nonparametric approach for testing whether an information set is useful for generating greater stock market returns. The approach is model free and thus the test of the information does not depend on the particular assumptions of an asset pricing model. Assuming No Arbitrage, a stochastic discount factor (SDF) is constructed from observed market assets. This SDF can be used as a pricing operator for examining dynamic portfolio returns to indicate the information content in the underlying trading strategy. Trading strategies based on technical trading rules are examined with the developed approach.