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Speculative behavior and the dynamics of interacting stock markets

Listed author(s):
  • Schmitt, Noemi
  • Westerhoff, Frank

We develop a simple agent-based financial market model in which heterogeneous speculators apply technical and fundamental analysis to trade in two different stock markets. Speculators' strategy/market selections are repeated at each time step and depend on predisposition effects, herding behavior and market circumstances. Simulations reveal that our model is able to explain a number of nontrivial statistical properties of and between international stock markets, including bubbles and crashes, fat-tailed return distributions, volatility clustering, persistent trading volume, coevolving stock prices and cross-correlated volatilities. Against this background, our model may be deemed to have been validated.

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File URL: https://www.econstor.eu/bitstream/10419/88115/1/772153167.pdf
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Paper provided by Bamberg University, Bamberg Economic Research Group in its series BERG Working Paper Series with number 90.

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Date of creation: 2013
Handle: RePEc:zbw:bamber:90
Contact details of provider: Postal:
D-96045 Bamberg

Phone: 0951/8632687
Fax: 0951/8632550
Web page: http://www.uni-bamberg.de/vwl/forschung/berg/

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