Heterogeneity of agents and exchange rate dynamics: Evidence from the EMS

Jong, Eelke de; Verschoor, Willem F. C.; Zwinkels, Remco C. J.

doi:10.1016/j.jimonfin.2010.05.007

Cited by 76 publications

(42 citation statements)

References 51 publications

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“…Boswijk et al (2007) estimate a version of the Hommes (1997, 1998) model directly for S&P 500 data using nonlinear least squares and Reitz (2003, 2005) and Reitz and Westerhoff (2007) use the STAR-GARCH model introduced by Lundbergh and Teräsvirta (1998) to estimate various models of chartists and fundamentalists for daily exchange rate data, the US corn market, and various other commodities markets, respectively. More recently, Cornea et al (2012) investigate behavioral heterogeneity in US inflation rate data using nonlinear least squares and de Jong et al (2010) estimate a HAM for the exchange-rate dynamics of the European Monetary System (EMS) using quasi-maximum likelihood techniques. Similar likelihood techniques are also employed in Kouwenberg and Zwinkels (2010) to investigate the 5 behaviour of the US housing market over the last 50 years and in ter Ellen and Zwinkels (2010) when considering oil price dynamics.…”

Section: Related Literaturementioning

confidence: 99%

Heterogeneous expectations in the gold market: Specification and estimation

Baur

Glover

2014

Journal of Economic Dynamics and Control

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The increase in the price of gold between 2002 and 2011 appears to be a candidate for a potential asset price 'bubble', suggesting that chartists (feedback traders) were highly active in the gold market during this period. Hence, this paper develops and tests empirically several models incorporating heterogeneous expectations of agents, specifically fundamentalists and chartists, for the gold market. The empirical results show that both agent types are important in explaining historical gold prices but that the 10-year bull run of gold in the early 2000s is consistent with the presence of agents extrapolating long-term trends. Technically this paper is a further step toward providing an empirical foundation for certain assumptions used in the heterogeneous agents literature. For example, the empirical results presented in this paper compare the economical and statistical significance of numerous switching variable specifications, that are generally only introduced ad-hoc.

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Section: Related Literaturementioning

confidence: 99%

Heterogeneous expectations in the gold market: Specification and estimation

Baur

Glover

2014

Journal of Economic Dynamics and Control

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“…Frijns et al (2010) verify that traders with di¤erent beliefs about volatility are active in option market. Manzan and Westerho¤ (2007) and De Jong et al (2010) …nd the existence of heterogeneous traders in foreign exchange markets. Lux (2012) uses agent-based model to estimate the opinion formation of German investors.…”

Section: Introductionmentioning

confidence: 99%

Estimating heterogeneous agents behavior in a two-market financial system

Chen

Huang

Zheng

2017

J Econ Interact Coord

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper, we propose a two-market empirical model with heterogeneous agents based on Chiarella et al. (2012). Using monthly data of French and US stock markets, the regression shows that individual markets have feature of two-regime switching process. By including inter-market traders whose trading decision is based on fundamental value of foreign market, the two-market model has a better capability in explaining both markets with domestic fundamental traders turning to be significant. The existence of inter-market traders implies that the two markets impact each other through their fundamental and hence share some common set of factors, which provides foundation of market interactions, such as market co-movement. In this paper, we propose a two-market empirical model with heterogeneous agents based on Chiarella et al. (2012). Using monthly data of French and US stock markets, the regression shows that individual markets have feature of two-regime switching process. By including inter-market traders whose trading decision is based on fundamental value of foreign market, the two-market model has a better capability in explaining both markets with domestic fundamental traders turning to be signi…cant. The existence of inter-market traders implies that the two markets impact each other through their fundamental and hence share some common set of factors, which provides foundation of market interactions, such as market co-movement. Terms of use: Documents in Keywords

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“…When the past appreciation or depreciation of the exchange rate is larger than the threshold value, their behaviour becomes stabilising. De Jong et al (2010) find evidence of stabilising behaviour of all types of agents for EMS rates, a result they assign to the investors' trust in the monetary authorities.…”

Section: Foreign Exchange Marketmentioning

confidence: 84%

“…The form of the model we show here is mostly related to some of our own applications of HAM (e.g. De Jong et al, 2010;ter Ellen and Zwinkels, 2010;Chiarella et al, 2014), which are largely based on the functional form from Hommes (1997, 1998) and Boswijk et al (2007).…”

Section: An Examplementioning

confidence: 99%