Testing of a market fraction model and power-law behaviour in the DAX 30

Journal of Empirical Finance, 2015, vol. 31, issue C, 1-17

Abstract: 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.

Keywords: Asset pricing; Fundamentalists and trend followers; (FI)GARCH; Power-law; Tail index (search for similar items in EconPapers)
JEL-codes: C15 D84 G12 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S092753981500002X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Testing of a Market Fraction Model and Power-Law Behaviour in the Dax 30 (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:31:y:2015:i:c:p:1-17

DOI: 10.1016/j.jempfin.2015.01.001

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().