The adaptiveness in stock markets: testing the stylized facts in the DAX 30

Xue Zhong He; Youwei Li

doi:10.1007/s00191-017-0505-9

The adaptiveness in stock markets: testing the stylized facts in the DAX 30

Xue Zhong He^*, Youwei Li

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

By testing a simple asset pricing model of heterogeneous agents to characterize the power-law behavior of the DAX 30 from 1975 to 2007, we provide supporting evidence on empirical findings that investors and fund managers use combinations of fixed and switching strategies based on fundamental and technical analysis when making investment decisions. A mechanism analysis based on the calibrated model provides a behavioral insight into the explanatory power of rational switching behavior of investors on the volatility clustering and long range dependence in return volatility.

Original language	English
Pages (from-to)	1071-1094
Number of pages	24
Journal	Journal of Evolutionary Economics
Volume	27
Issue number	5
DOIs	https://doi.org/10.1007/s00191-017-0505-9
Publication status	Published - 1 Nov 2017
Externally published	Yes

Keywords

Adaptive switching
Fundamental and technical analysis
Power-law
Stylized facts
Tail index

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10.1007/s00191-017-0505-9

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abstract = "By testing a simple asset pricing model of heterogeneous agents to characterize the power-law behavior of the DAX 30 from 1975 to 2007, we provide supporting evidence on empirical findings that investors and fund managers use combinations of fixed and switching strategies based on fundamental and technical analysis when making investment decisions. A mechanism analysis based on the calibrated model provides a behavioral insight into the explanatory power of rational switching behavior of investors on the volatility clustering and long range dependence in return volatility.",

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KW - Stylized facts

KW - Tail index

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The adaptiveness in stock markets: testing the stylized facts in the DAX 30

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Keywords

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