Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/169122
Authors: 
Schasfoort, Joeri
Stockermans, Christopher
Year of Publication: 
2017
Series/Report no.: 
Economics Discussion Papers 2017-63
Abstract: 
The use of fundamentalist traders in the stock market models is problematic since fundamental values in the real world are unknown. Yet, in the literature to date, fundamentalists are often required to replicate key stylized facts. The authors present an agent-based model of the stock market in which the fundamental value of the asset is unknown. They start with a zero intelligence stock market model with a limit-order-book. Then, the authors add technical traders which switch between a simple momentum and mean reversion strategy depending on its relative profitability. Technical traders use the price to earnings ratio as a proxy for fundamentals. If price to earnings are either too high or too low, they sell or buy, respectively.
Subjects: 
Agent-based modelling
financial markets
technical and fundamental analysis
asset pricing
JEL: 
C63
D53
D84
G12
G17
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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