Heterogeneous agent model with memory and asset price behaviour

Miloslav Vošvrda and Lukas Vacha

Prague Economic Papers, 2003, vol. 2003, issue 2, 155-168

Abstract: The efficient markets hypothesis provides a theoretical basis on which technical trading rules (TTRs) are rejected as a viable trading strategy. TTRs, providing a signal to the user when to buy or sell asset based on such price patterns, should not be useful for generating excess returns. Technical traders tend to put little faith in strict efficient markets hypothesis. This approach relies on heterogeneity in the agent information and subsequent decisions either as fundamentalists or as technical traders. Switching between the technical trader's and fundamentalist's strategy is a basis of the cycle behaviour. This event is analysed by the Brock and Hommes (BH) model. Moreover, the memory case is added to this model because BH model was the memory-less model. This branch consists of a behaviour analysis among fundamentalists and technical traders. Here is a basis for endogenous source of the real business cycle.

Keywords: efficient markets hypothesis; technical trading rules; fundamentalists; technical traders; chartists and contrarians; heterogeneous agent model with memory; asset price behaviour (search for similar items in EconPapers)
JEL-codes: C61 D84 G14 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (5)

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DOI: 10.18267/j.pep.212

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