A Dynamic Analysis of Moving Average Rules in a Double Auction Market
نویسندگان
چکیده
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 fundamentalist, chartists and noisetraders with the chartists basing their order decisions on moving average signals. Agentsswitch between fundamentalist and chartist strategies by using the Brock-Hommes strategyswitching mechanism. Simulations of the resulting model show that the model is able toreproduce quite well the stylised facts of financial markets. ReferencesBrock, W. and Hommes, C. (1997) A rational route to randomness. Econometrica, 65,P.1059-1095.Chiarella, C., He. T. and Hommes, C. (2006a) A dynamic analysis of moving average rules.Journal of Economic Dynamics and Control, 30 (9-10), P.1729-1753. ⋆Corresponding author: [email protected], School of Finance and Economics, University of Technol-ogy, Sydney, PO Box 123, Broadway, NSW 2007, Australia.1
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