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Moving Averages And Price Dynamics

Author

Listed:
  • R. BAVIERA

    (Departement Finance & Economie, Groupe HEC, Rue de la Liberation 1, F-78351 Jouy-en-Josas, France)

  • M. PASQUINI

    (Istituto Nazionale di Fisica della Materia, I-67010 Coppito, L'Aquila, Italy)

  • J. RABOANARY

    (Institute Superieur Polytecnique de Madagascar, Lot G III 32 Bis, Soamandrariny, Antananarivo, Madagascar)

  • M. SERVA

    (Dipartimento di Matematica, Università dell'Aquila, I-67010 Coppito, L'Aquila, Italy)

Abstract

We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. The future price is linearly influenced by the difference between the moving average and the current price, together with a noise component. Our model is tested against financial datasets, showing an extremely good agreement with them.

Suggested Citation

  • R. Baviera & M. Pasquini & J. Raboanary & M. Serva, 2002. "Moving Averages And Price Dynamics," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 5(06), pages 575-583.
    • Handle: RePEc:wsi:ijtafx:v:05:y:2002:i:06:n:s0219024902001560
    DOI: 10.1142/S0219024902001560
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    Cited by:

    1. Alfi, V. & Coccetti, F. & Marotta, M. & Pietronero, L. & Takayasu, M., 2006. "Hidden forces and fluctuations from moving averages: A test study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 30-37.

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