Trend followers, contrarians and fundamentalists: explaining the dynamics of financial markets
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Beschreibung
We propose an empirically motivated financial market model in which speculators rely on trend-following, contrarian and fundamental trading rules to determine their orders. Speculators' probabilistic rule-selection behavior -the only type of randomness in our model- depends on past and future performance indicators. For a large number of speculators, the model's intrinsic noise vanishes and its dynamics is driven by an analytically tractable nonlinear map. An in-depth investigation into this map provides the key to understanding how the model functions. Since our model is able to match a number of important stylized facts concerning financial markets, it may be regarded as validated.
Autor*in
Noemi Schmitt
Themen in »Trend followers, contrarians and fundamentalists: explaining the dynamics of financial markets«
financial markets nonlinear dynamics probabilistic rule-selection behavior stability and bifurcation analysis stylized facts technical and fundamental analysis