Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152260
Authors: 
Schmitt, Noemi
Westerhoff, Frank
Year of Publication: 
2017
Series/Report no.: 
BERG Working Paper Series 119
Abstract: 
After showing that the distribution of the S&P 500's distortion, i.e. the log difference between its real stock market index and its real fundamental value, is bimodal, we demonstrate that agentbased financial market models may explain this puzzling observation. Within these models, speculators apply technical and fundamental analysis to predict asset prices. Since destabilizing technical trading dominates the market near the fundamental value, asset prices tend to be either overvalued or undervalued. Interestingly, the bimodality of the distribution of the S&P 500's distortion confirms an implicit prediction of a number of seminal agent-based financial market models.
Subjects: 
stock market dynamics
bubbles and crashes
chartists and fundamentalists
nonlinear dynamics
bimodality tests
time series analysis
JEL: 
G12
G14
G17
ISBN: 
978-3-943153-38-5
Document Type: 
Working Paper

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