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Zoekopdracht: faculteit: "FEB" en publicatiejaar: "2006"

AuteursC. Chiarella, X.Z. He, C.H. Hommes
TitelMoving average rules as a source of market instability
TijdschriftPhysica. A : Statistical Mechanics and its Applications
Jaargang370
Jaar2006
Nummer1
Pagina's12-17
ISSN03784371
FaculteitFaculteit Economie en Bedrijfskunde
Instituut/afd.FEB: Research Institute in Economics and Econometrics Amsterdam (RESAM)
SamenvattingDespite the pervasiveness of the efficient markets paradigm in the academic finance literature, the use of various moving average (MA) trading rules remains popular with financial market practitioners. This paper proposes a stochastic dynamic financial market model in which demand for traded assets has both a fundamentalist and a chartist component. The chartist demand is governed by the difference between current price and a (long-run) MA. Our simulations show that the MA is a source of market instability, and the interaction of the MA and market noises can lead to the tendency for the market price to take long excursions away from the fundamental. The model reveals various market price phenomena, the coexistence of apparent market efficiency and a large chartist component, price resistance levels, long memory and skewness and kurtosis of returns. Keywords: Moving averages; Fundamentalists; Trend followers; Stability; Evolutionary switching
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