Speculative bubbles and crashes： Fundamentalists and positive‐feedback trading

Listen to the signals from an interactive agent‐based model

“…extending HAMs to empirical studies. In this paper, we extend the empirical results of Cheng and Kim (2017), providing a trading strategy based on the estimations of chosen key parameters. Our trading strategy is able to ride the bubbles during rising periods and avoid declining period after bubbles burst.…”

“…In this paper, we extend the estimated results of an interactive agent-based model proposed by Cheng and Kim (2017), providing a trading strategy based on the estimations of their model. Our trading strategy is able to capture some rising periods during the Dot-com Bubble and the Housing Bubble and avoid some declining periods as bubbles burst.…”

“…We adopt the model (Case 1) with t-distributed shock terms from Cheng and Kim (2017) and estimate the key parameters. 2 Model is briefly reviewed at the Appendix 1.…”

Transitions among states behind interactive agent model

“…We adapt the model (Case 1) from Cheng and Kim (2017). Suppose there is a single stock market that is populated with three types of traders: fundamentalists, positive-feedback traders, and noise traders.…”

“…Different from Cheng and Kim (2017), we let fundamentalists and positive-feedback traders switch to each other's strategy according to the performance differentials of recent history record back to past period…”