Effects of fundamentals acquisition and strategy switch on stock price dynamics
Authored by Songtao Wu, Jianmin He, Shouwei Li
Date Published: 2018
DOI: 10.1016/j.physa.2017.09.072
Sponsors:
Science Foundation of Jiangsu Province
Chinese National Natural Science Foundation
Humanities and Social Sciences Foundation of Ministry of Education of the PR China
Platforms:
No platforms listed
Model Documentation:
Other Narrative
Mathematical description
Model Code URLs:
Model code not found
Abstract
An agent-based artificial stock market is developed to simulate trading
behavior of investors. In the market, acquisition and employment of
information about fundamentals and strategy switch are investigated to
explain stock price dynamics. Investors could obtain the information
from both market and neighbors resided on their social networks.
Depending on information status and performances of different
strategies, an informed investor may switch to the strategy of
fundamentalist. This in turn affects the information acquisition
process, since fundamentalists are more inclined to search and spread
the information than chartists. Further investigation into price
dynamics generated from three typical networks, i.e. regular lattice,
small-world network and random graph, are conducted after general
relation between network structures and price dynamics is revealed. In
each network, integrated effects of different combinations of
information efficiency and switch intensity are investigated. Results
have shown that, along with increasing switch intensity, market and
social information efficiency play different roles in the formation of
price distortion, standard deviation and kurtosis of returns. (C) 2017
Elsevier B.V. All rights reserved.
Tags
Social networks
behavior
Artificial stock market
networks
multi-agent based model
Chaos
Model
Interacting agents
Rules
Impact
Financial-markets
Heterogeneous beliefs
Stock price dynamics
Information efficiency
Strategy switch
Asset
price