A Dynamic Analysis of the Microstructure of Moving Average Rules in a Double Auction Market
نویسندگان
چکیده
Abstract. Inspired by the theoretically oriented dynamic analysis of moving average rules in Chiarella, He and Hommes (CHH) (2006a) model, this paper conducts a dynamic analysis of a microstructure model of continuous double auctions in which the probability of heterogeneous agents to trade is determined by the rules of either fundamentalists mean-reverting to the fundamental or chartists who use moving average rules and their relative performance. With the realistic market microstructure, the model is able not only to obtain the results of the CHH model but also to characterise most of the stylized facts including the power-law behaviour of volatility. The results seem to suggest that a comprehensive explanation of several statistical properties of returns is possible in a framework where both behavioral traits and realistic microstructure have a role.
منابع مشابه
A Dynamic Analysis of Moving Average Rules in a Double Auction Market
This paper will build on earlier work of Chiarella, He and Hommes (2006)(CHH) who investigate the stabilising and destabilising impact on financial markets ofthe commonly used moving average rules. The model of CHH relied on a market makermechanism to clear the market. Here we shall consider a continuous double auction as themarket clearing mechanism. The market consists of fund...
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