The adaptiveness in stock markets: testing the stylized facts in the DAX 30

Publication Type:
Journal Article
Citation:
Journal of Evolutionary Economics, 2017, 27 (5), pp. 1071 - 1094
Issue Date:
2017-11-01
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© 2017, Springer-Verlag Berlin Heidelberg. By testing a simple asset pricing model of heterogeneous agents to characterize the power-law behavior of the DAX 30 from 1975 to 2007, we provide supporting evidence on empirical findings that investors and fund managers use combinations of fixed and switching strategies based on fundamental and technical analysis when making investment decisions. A mechanism analysis based on the calibrated model provides a behavioral insight into the explanatory power of rational switching behavior of investors on the volatility clustering and long range dependence in return volatility.
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