Xue Zhong He
Testing of a market fraction model and power-law behaviour in the DAX 30
He, Xue Zhong; Li, Youwei
Professor Youwei Li Youwei.Li@hull.ac.uk
This paper tests a simple market fraction asset pricing model with heterogeneous agents. By selecting a set of structural parameters of the model through a systematic procedure, we show that the autocorrelations (of returns, absolute returns and squared returns) of the market fraction model share the same pattern as those of the DAX 30. By conducting econometric analysis via Monte Carlo simulations, we characterize these power-law behaviours and find that estimates of the power-law decay indices, the (FI)GARCH parameters, and the tail index of the selected market fraction model closely match those of the DAX 30. The results strongly support the explanatory power of the heterogeneous agent models.
|Journal Article Type||Article|
|Journal||Journal of Empirical Finance|
|Peer Reviewed||Peer Reviewed|
|APA6 Citation||He, X. Z., & Li, Y. (2015). Testing of a market fraction model and power-law behaviour in the DAX 30. Journal of Empirical Finance, 31, 1-17. https://doi.org/10.1016/j.jempfin.2015.01.001|
|Keywords||Asset pricing; Fundamentalists and trend followers; (FI)GARCH; Power-law; Tail index|
|Additional Information||This article is maintained by: Elsevier; Article Title: Testing of a market fraction model and power-law behaviour in the DAX 30; Journal Title: Journal of Empirical Finance; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jempfin.2015.01.001; Content Type: article; Copyright: Copyright © 2015 Elsevier B.V. All rights reserved.|
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