Market entry waves and volatility outbursts in stock markets
| Autor: | Frank Westerhoff, Noemi Schmitt, Ivonne Blaurock |
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| Rok vydání: | 2018 |
| Předmět: |
Organizational Behavior and Human Resource Management
Economics and Econometrics Stylized fact 050208 finance 05 social sciences Financial market Monetary economics Market risk 0502 economics and business Economics Stock market 050207 economics Volatility (finance) Speculation Herd behavior Stock (geology) |
| Zdroj: | Journal of Economic Behavior & Organization. 153:19-37 |
| ISSN: | 0167-2681 |
| Popis: | We develop a simple agent-based financial market model in which speculators’ market entry decisions are subject to herding behavior and market risk. In addition, speculators’ orders depend on price trends, market misalignments and fundamental news. Using a mix of analytical and numerical tools, we show that a herding-induced market entry wave may amplify excess demand, triggering lasting volatility outbursts. Eventually, however, higher stock market risk reduces stock market participation and volatility decreases again. Simulations furthermore reveal that our approach is also able to produce bubbles and crashes, excess volatility, fat-tailed return distributions and serially uncorrelated price changes. Moreover, trading volume is persistent and correlated with volatility. |
| Databáze: | OpenAIRE |
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