Beat The Market
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Fan Wang: Stony Brook University, JP Morgan Chase & Co.
Game Theory and Information from University Library of Munich, Germany
Speculation in asset market is modelled as a stochastic betting game played by finite number of players and repeated infinite times. With stochastic asset return and unkown quality of public signal, a generic adaptive learning rule is proposed and the corresponding evolutionary dynamics is analyzed. The impact of historical events on players' belief decays over time. It is proved to be a robust approach to adapt to stochastic regime shifts in the market. The market dynamics has characteristics, i.e. endogenous boom-bust cycle, positive correlation in return and volume, and negative first order autocorrelation in return series, commonly observed in financial market but inexplicable by conventional rational expectations theory.
Keywords: Evolutionary Dynamics; Adaptive Learning; Behavioral Finance (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-gth
Note: Type of Document - pdf; pages: 21
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:0507006
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