Convergence of fundamentalists and chartists’ expectations: An alarm for stock market crash

Meysam Bolgorian and Reza Raei

Physica A: Statistical Mechanics and its Applications, 2010, vol. 389, issue 18, 3822-3827

Abstract: We construct a network of the Tehran stock market based on the cross-correlation of trading volume of stocks both for fundamentalists and chartists. In order to investigate the dynamics of expectations of fundamentalists and chartists over time we introduced a homogeneity coefficient. Our results show that in the Tehran Stock Exchange (TSE) which is an emerging market, chartists in comparison with fundamentalists more strongly believe the stocks’ co-movements. We also found that in a bull market (booming period), the optimism of fundamentalists and chartists about the similarity of stocks’ performance diverge from each other while in a bear market (recession period) both groups of traders have approximately same level of pessimism about the simultaneous collapse of stock prices.

Keywords: Complex networks; Trading volume; Fundamentalists; Chartists (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:389:y:2010:i:18:p:3822-3827

DOI: 10.1016/j.physa.2010.05.017

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