Economics, Econometrics and Finance
3 years ago

Financial Markets Revolutionized: Long Memory Unveiled in Investor Behavior

SSRN Electronic Journal
Long Memory in Financial Markets: A Heterogeneous Agent Model Perspective
Min Zheng, Ruipeng Liu, Youwei Li

Paper Summary

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Financial markets are complex and influenced by different types of investors. This study looks at how two types of investors, fundamentalists and chartists, interact in the market. By simulating their behavior, the researchers found that the model can explain the long-term patterns seen in financial data. They discovered that the speed at which prices adjust in response to supply and demand is a key factor in determining these patterns. This suggests that the way investors make decisions can have a lasting impact on market behavior.