Wavelets and Sentiment in the Heterogeneous Agents Model
AbstractThe paper concerns a heterogeneous agent model, which is an extension of the Brock and Hommes model. The heterogeneous agents approach challenges the traditional representative rational agent framework. Heterogeneity in expectations can lead to market instability and complicated price dynamics. In our paper we introduce the concept of the sentiment change. We use wavelets for frequency detection in price time series analysis. We show that the application of the sentiment change on financial markets provides a new possibility for the incorporation of the behavioral approach into the theoretical financial market model.
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Bibliographic InfoArticle provided by The Czech Econometric Society in its journal Bulletin of the Czech Econometric Society.
Volume (Year): 15 (2008)
Issue (Month): 25 ()
heterogeneous agent model; market sentiment; Hurst exponent; wavelets;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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