Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200125
Authors: 
Schmitt, Noemi
Westerhoff, Frank H.
Year of Publication: 
2019
Series/Report no.: 
BERG Working Paper Series 151
Abstract: 
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.
Subjects: 
financial markets
stylized facts
technical and fundamental analysis
probabilistic rule-selection behavior
nonlinear dynamics
stability and bifurcation analysis
JEL: 
C63
D84
G15
ISBN: 
978-3-943153-72-9
Document Type: 
Working Paper

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