Estimating heterogeneous agents behavior in a two-market financial system

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper, we propose a two-market empirical model with heterogeneous agents based on Chiarella et al. (2012). Using monthly data of French and US stock markets, the regression shows that individual markets have feature of two-regime switching process. By including inter-market traders whose trading decision is based on fundamental value of foreign market, the two-market model has a better capability in explaining both markets with domestic fundamental traders turning to be significant. The existence of inter-market traders implies that the two markets impact each other through their fundamental and hence share some common set of factors, which provides foundation of market interactions, such as market co-movement. In this paper, we propose a two-market empirical model with heterogeneous agents based on Chiarella et al. (2012). Using monthly data of French and US stock markets, the regression shows that individual markets have feature of two-regime switching process. By including inter-market traders whose trading decision is based on fundamental value of foreign market, the two-market model has a better capability in explaining both markets with domestic fundamental traders turning to be signi…cant. The existence of inter-market traders implies that the two markets impact each other through their fundamental and hence share some common set of factors, which provides foundation of market interactions, such as market co-movement. Terms of use: Documents in Keywords

Essays on international financial integration

“…Numbers in the parentheses are standard errors. Third, given that β A 3 is negative and significant at 10%, the finding suggests that international fundamentalist will dominate the US stock market during high risk periods, which is consistent with the findings on Chen et al(2015).…”

Extrusion Printing of Surface‐Functionalized Metal‐Organic Framework Inks for a High‐Performance Wearable Volatile Organic Compound Sensor

“…[ 43,44 ] To address this issue, polymetric surface modification on particles has demonstrated as an effective approach to produce the high particle‐loading film. [ 49 ] This is due to enhancing the dispersion of particles within a polymer matrix and promoting the interactions between the two parts. [ 50–52 ] Furthermore, owing to their processability, the hybrid liquids consisting of gas‐sensing particles and liquid polymers can be employed as ideal extrusion‐printing inks.…”

Regional financial market bloc and spillover of the financial crisis: A heterogeneous agents approach

“…Besides the chartist behavior, fundamental factors also contribute to the spillover of crises. Based on a two‐market heterogeneous agents model, Chen, Huang, and Zheng () study the interactions between the French and US stock markets and report that the two markets impact each other through the changes of their fundamentals, providing foundations of market phenomena such as co‐movement and even the extreme case of financial crisis spillover. Since a typical approach studying the spillover of financial crises in the literature is to introduce exogenous shocks to prices or market fundamental (see, e.g., Rochet & Tirole, ; Aghion, Bolton, & Dewatripont, ; Allen & Gale, ; Freixas, Parigi, & Rochet, ), this paper also demonstrates the second mechanism of the spillover of the financial crisis using exogenous shocks to market fundamentals.…”