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Why a Simple Herding Model May Generate the Stylized Facts of Daily Returns : Explanation and Estimation
Westerhoff, Frank H.; Franke, Reiner (2012): „Why a Simple Herding Model May Generate the Stylized Facts of Daily Returns : Explanation and Estimation“. Bamberg: opus.
Faculty/Professorship:
Author:
Other Contributing Persons:
Corporate Body:
BERG (Bamberg Economic Research Group)
Publisher Information:
Year of publication:
2012
Pages:
ISBN:
978-3-931052-93-5
Source/Other editions:
zuerst erschienen im BERG-Verlag, 2011
Year of first publication:
2011
Language:
English
Licence:
Abstract:
The paper proposes an elementary agent-based asset pricing model that, invoking the two trader types of fundamentalists and chartists, comprises four features: (i) price determination by excess demand; (ii) a herding mechanism that gives rise to a macroscopic adjustment equation for the market fractions of the two groups; (iii) a rush towards fundamentalism when the price misalignment becomes too large; and (iv) a stronger noise component in the demand per chartist trader than in the demand per fundamentalist trader, which implies a structural stochastic volatility in the returns. Combining analytical and numerical methods, the interaction between these elements is studied in the phase plane of the price and a majority index. In addition, the model is estimated by the method of simulated moments, where the choice of the moments reflects the basic stylized facts of the daily returns of a stock market index. A (parametric) bootstrap procedure serves to set up an econometric test to evaluate the model’s goodness-of-fit, which proves to be highly satisfactory. The bootstrap also makes sure that the estimated structural parameters are well identified.
GND Keywords: ;  ; 
Capital-Asset-Pricing-Modell
Mehragentensystem
Volatilität
Keywords:
Structural stochastic volatility; method of simulated moments; autocorrelation pattern; fat tails; bootstrapped p-values
DDC Classification:
RVK Classification:
Type:
Workingpaper
published:
January 25, 2013
Permalink
https://fis.uni-bamberg.de/handle/uniba/1032