Abstract
In this paper, we propose a two-market empirical model with heterogeneous agents based on Chiarella et al. (J Econ Behav Organ 83(3):446–460, 2012). Using monthly data of French and US stock markets, the regression shows that individual markets have features of a 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 fundamentals and hence share some common set of factors, which provides foundation of market interactions, such as market co-movement. © 2017, Springer-Verlag Berlin Heidelberg.
| Original language | English |
|---|---|
| Pages (from-to) | 491-510 |
| Journal | Journal of Economic Interaction and Coordination |
| Volume | 13 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 1 Oct 2018 |
| Externally published | Yes |
Bibliographical note
Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].Funding
This project has received funding from the European Union\u2019s Seventh Framework Programme for research, technological development and demonstration under Grant Agreement No. 612955 and the National Natural Science Foundation of China under Grant Agreement No. 71671017.
Research Keywords
- Co-movement
- Cross-correlation
- Financial multi-market interactions
- Heterogeneous agents
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