Can trend followers survive in the long-run? Insights from agent-based modeling

Xue Zhong He; Philip Hamill; Youwei Li

doi:10.1007/978-3-540-77477-8_14

Can trend followers survive in the long-run? Insights from agent-based modeling

Xue Zhong He^*, Philip Hamill, Youwei Li

^*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceeding › Chapter › peer-review

3 Citations (Scopus)

Abstract

This chapter uses a simple stochastic market fraction (MF) asset pricing model to investigate market dominance, profitability, and how traders adopting fundamental analysis or trend following strategies can survive under various market conditions in the long/short-run. This contrasts with the modern theory of finance which relies on the paradigm of utility maximizing representative agents and rational expectations assumptions which some contemporary theorists regard as extreme. This school of thought would predict that trend followers will be driven out of the markets in the long-run. Our analysis shows that in a MF framework this is not necessarily the case and that trend followers can survive in the long-run.

Original language	English
Title of host publication	Natural Computing in Computational Finance
Editors	Anthony Brabazon, Michael O'Neill
Pages	253-269
Number of pages	17
DOIs	https://doi.org/10.1007/978-3-540-77477-8_14
Publication status	Published - 2008
Externally published	Yes

Publication series

Name	Studies in Computational Intelligence
Volume	100
ISSN (Print)	1860-949X

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10.1007/978-3-540-77477-8_14

Cite this

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abstract = "This chapter uses a simple stochastic market fraction (MF) asset pricing model to investigate market dominance, profitability, and how traders adopting fundamental analysis or trend following strategies can survive under various market conditions in the long/short-run. This contrasts with the modern theory of finance which relies on the paradigm of utility maximizing representative agents and rational expectations assumptions which some contemporary theorists regard as extreme. This school of thought would predict that trend followers will be driven out of the markets in the long-run. Our analysis shows that in a MF framework this is not necessarily the case and that trend followers can survive in the long-run.",

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Can trend followers survive in the long-run? Insights from agent-based modeling. / He, Xue Zhong; Hamill, Philip; Li, Youwei.
Natural Computing in Computational Finance. ed. / Anthony Brabazon; Michael O'Neill. 2008. p. 253-269 (Studies in Computational Intelligence; Vol. 100).

Research output: Chapter in Book or Report/Conference proceeding › Chapter › peer-review

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Can trend followers survive in the long-run? Insights from agent-based modeling

Abstract

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