A survey of market practitioners’ views on exchange rate dynamics

Cheung, Yin‐Wong; Wong, Clement Yuk-Pang

doi:10.1016/s0022-1996(99)00009-4

Cited by 178 publications

(119 citation statements)

References 31 publications

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“…They find weak evidence of cointegration for the NOK/DEM rate and stronger evidence for the DEM/USD rate. 4 Finally, Killen et. al (2006) have data on the daily value of purchases and sales in the FRF/DEM market from January to May 1 (4 months) in the brokered interdealer market from EBS.…”

Section: Literature Surveymentioning

confidence: 99%

Exchange rates and order flow in the long run

Boyer

Norden

2006

Finance Research Letters

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Section: Literature Surveymentioning

confidence: 99%

Exchange rates and order flow in the long run

Boyer

Norden

2006

Finance Research Letters

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“…Market surveys (16)(17)(18) also provide clear evidence of the prevalence of technical analysis. We consider here only technical traders, assuming that fundamentalists contribute only to market noise.…”

Section: Empirical and Theoretical Market Behaviorsmentioning

confidence: 99%

Linking agent-based models and stochastic models of financial markets

Feng

Podobnik

et al. 2012

Proc. Natl. Acad. Sci. U.S.A.

137

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It is well-known that financial asset returns exhibit fat-tailed distributions and long-term memory. These empirical features are the main objectives of modeling efforts using (i) stochastic processes to quantitatively reproduce these features and (ii) agent-based simulations to understand the underlying microscopic interactions. After reviewing selected empirical and theoretical evidence documenting the behavior of traders, we construct an agent-based model to quantitatively demonstrate that "fat" tails in return distributions arise when traders share similar technical trading strategies and decisions. Extending our behavioral model to a stochastic model, we derive and explain a set of quantitative scaling relations of long-term memory from the empirical behavior of individual market participants. Our analysis provides a behavioral interpretation of the long-term memory of absolute and squared price returns: They are directly linked to the way investors evaluate their investments by applying technical strategies at different investment horizons, and this quantitative relationship is in agreement with empirical findings. Our approach provides a possible behavioral explanation for stochastic models for financial systems in general and provides a method to parameterize such models from market data rather than from statistical fitting.complex systems | power law | scaling laws M odeling price returns has become a central topic in the study of financial markets due to its key role in financial theory and its practical utility. Following models by Engle and Bollerslev (1, 2), many stochastic models have been proposed based on statistical studies of financial data to accurately reproduce price dynamics. In contrast to this stochastic approach, economists and physicists using the tools of statistical mechanics have adopted a bottom-up approach to simulate the same macroscopic regularity of price changes, with a focus on the behavior of individual market participants (3-10). Although the second socalled agent-based approach has provided a qualitative understanding of price mechanisms, it has not yet achieved sufficient quantitative accuracy to be widely accepted by practitioners.Here, we combine the agent-based approach with the stochastic process approach and propose a model based on the empirically proven behavior of individual market participants that quantitatively reproduces fat-tailed return distributions and long-term memory properties (11-14). Empirical and Theoretical Market BehaviorsWe start by arguing that technical traders (usually agents seeking arbitrage opportunities and make their trading decisions based on price patterns) contribute much more to the dynamics of daily stock prices S t (or log price s t ≡ lnðS t Þ) than fundamentalists (who attempt to determine the fundamental values of stocks). Although fundamentalists hold a majority of the stocks, they trade infrequently (see SI Appendix, Fig. S6). In contrast, technical traders contribute most of the trading activities (15) by trading their minority h...

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“…Bunlar (i) makro yaklaşımın zayıf performansına dikkat çekip alım-satım emrinin döviz kurlarına etkisini analiz eden çalışmalar (Evans (1999); Luo (2001); Evans, Lyons (2001, 2002, 2004, 2005a; Danielsson vd., (2002) ;Breedon,Vitale (2004) ;Sager, Taylor (2006); Rime (2006) ;Berger vd., (2008);Smyth (2009) ;Evans, Rime (2010) ;Loucha, Laborda (2010) ;Dunne vd., (2010) ;Cerrato vd., (2011);Danielsson vd., (2011) ve Ngulyen, Shin (2011)); (ii) Hem kamusal hem de özel bilgileri içeren karma (hybrid) döviz kuru modelleri (Rime (2000); Evans, Lyons (2005b, 2007Frömmel vd., (2008); Chinn, Moore (2011)); (iii) Haberlerin varlık fiyatlarına etkisini dikkate alan çalışmalar (Andersen vd., (2002), Love, Payne (2002) ;Evans, (2008) ;Iwatsubo, Marsh (2011) ve Rime vd., (2010); (iv) Mikro yapı yaklaşımının döviz kuruna etkisini merkez bankası müdahalesi ile ilişkilendiren çalışmalar (Dominguez (2003) ve Marsh (2011) ve (v) Son olarak, ampirik literatürün bir başka kolu, döviz kurunun makro ve mikro yapısı ile ilgili detaylı sorular sorup anket çalışmaları yapan makalelerden oluşmaktadır (Cheung, Chinn (1999, 2001Cheung, Wong (2000); Bhanumurthy (2002…”

Section: Mi̇kro Yapi Yaklaşiminin Ampi̇ri̇k Yönleri̇unclassified

Döviz Kurlarına Mikro Yapı Yaklaşımı: Bir Yazın İncelemesi

Berke

2015

Hacettepe Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi

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Öz1990'lı yıllardan itibaren döviz kuru belirlenmesinde makro yaklaşımların başarısız olmasıyla birlikte özellikle kısa vadeli kur hareketlerinin belirlenmesinde döviz kurlarına mikro yapı yaklaşımı ortaya atılmıştır. Bu teori, bir yandan döviz kuru ekonomileri, diğer yandan mikro finans teorileri arasında bir köprü oluşturmuştur. Döviz kurlarına mikro yapı teorisi, makro yaklaşımdan farklı olarak, piyasa katılımcıları arasında bilginin aktarımı, piyasadaki ajanların davranışı, alım-satım emrinin önemi, ajanların beklentilerinin heterojenliği ve bunun ticaret hacmi ile döviz kuru hareketleri yönünden sonuçları ile ilgilidir. Bu çalışmada, Türkiye'de ihmal edilen bir konu olan döviz kurlarına mikro yapı yaklaşımı teorik ve ampirik düzeyde tanıtılmaktadır.Anahtar Sözcükler: Döviz kurları, mikro yapı yaklaşımı, makro yaklaşım. Abstract The Microstructure Approach to Exchange Rates: A Literature ReviewThe microstructure approach to exchange rates in determining the short-term exchange rate movements have been proposed with failure of macro approaches to the determination of the exchange rate since the 1990s. This theory, on the one hand, the economies of the exchange rate, on the other hand, it has created a bridge between micro-finance theories. Microstructure theory of exchange rates, unlike the macro approach, is interested in the transfer of information between market participants, the behavior of agents in the market, the importance of order flow, the heterogeneity of agents' expectations and with the results of this in terms of the volume of trade and exchange rate movements. In this study, microstructure approach to exchange rates which is subject to a neglected in Turkey is introduced at the theoretical and empirical level.

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A survey of market practitioners’ views on exchange rate dynamics

Cited by 178 publications

References 31 publications

Exchange rates and order flow in the long run

Exchange rates and order flow in the long run

Linking agent-based models and stochastic models of financial markets

Döviz Kurlarına Mikro Yapı Yaklaşımı: Bir Yazın İncelemesi

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