Transitions in the stock markets of the US, UK and Germany

Authored by Friedrich Wagner, Matthias Raddant

Date Published: 2017

DOI: 10.1080/14697688.2016.1183812

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

In an analysis of the US, the UK and German stock market, we find a change in the behaviour based on the stocks' beta values. In the years 1995-2006, trades of stocks with high beta and large volume were concentrated in the IT and technology sector, whereas in 2006-2012 those trades are dominated by stocks from the financial sector. We show that an agent-based model can reproduce such a transition. We further show that the initial impulse for the transition might stem from the increase of high-frequency trading at that time.
Tags
CAPM Risk Model Financial-markets Returns Stock price correlations Financial risk