Anchoring effect on first passage process in Taiwan financial market
Jing-Yuan Ko and
Physica A: Statistical Mechanics and its Applications, 2017, vol. 477, issue C, 114-127
Empirical analysis of the price fluctuations of financial markets has received extensive attention because a substantial amount of financial market data has been collected and because of advances in data-mining techniques. Price fluctuation trends can help investors to make informed trading decisions, but such decisions may also be affected by a psychological factors—the anchoring effect. This study explores the intraday price time series of Taiwan futures, and applies diffusion model and quantitative methods to analyze the relationship between the anchoring effect and price fluctuations during first passage process. Our results indicate that power-law scaling and anomalous diffusion for stock price fluctuations are related to the anchoring effect. Moreover, microscopic price fluctuations before switching point in first passage process correspond with long-term price fluctuations of Taiwan’s stock market. We find that microscopic trends could provide useful information for understanding macroscopic trends in stock markets.
Keywords: First passage process; First return time; Switching point; Anchoring effect; Anomalous diffusion (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:477:y:2017:i:c:p:114-127
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