Estimating heterogeneous agents behavior in a two-market financial system

Zhenxi Chen, Weihong Huang and Huanhuan Zheng

No 48, FinMaP-Working Papers from Collaborative EU Project FinMaP - Financial Distortions and Macroeconomic Performance: Expectations, Constraints and Interaction of Agents

Abstract: 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.

Keywords: cross-correlation; co-movement; heterogeneous agents; financial multi-market interactions (search for similar items in EconPapers)
JEL-codes: D84 G12 G15 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Estimating heterogeneous agents behavior in a two-market financial system (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fmpwps:48

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