Financial crises and regime-dependent dynamics

Weihong Huang; Huanhuan Zheng

doi:10.1016/j.jebo.2012.02.008

Financial crises and regime-dependent dynamics

Weihong Huang, Huanhuan Zheng

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

28 Citations (Scopus)

Abstract

Generalized with the regime-dependent beliefs and regime-switching dynamics, the simple market-maker framework established by Day and Huang (1990) is capable to model all types of crises, that is, sudden crisis, disturbing crisis and smooth crisis, and to offer economic and dynamic justifications on how and why these crises appear. Moreover, the model simulations verify the salient qualitative and statistical properties commonly observed in the real financial data such as fat tails, volatility clustering, long range dependence, leverage effect and other stylized facts. Additionally, the model replicates the various chart patterns widely applied in the technical analysis. © 2012 Elsevier B.V..

Original language	English
Pages (from-to)	445-461
Journal	Journal of Economic Behavior and Organization
Volume	82
Issue number	2-3
DOIs	https://doi.org/10.1016/j.jebo.2012.02.008
Publication status	Published - May 2012
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 research is partially supported by Grant RG58/10 from Ministry of Education , Singapore. We thank the editor, the anonymous reviewers, Wai-Mun Chia, Walter Theseira, Qiyan Ong and seminar participants in Sogang University, University of Queensland, University of Glasgow and Victoria University of Wellington for comments and suggestions that help improve the paper substantially. The usual caveat applies.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Research Keywords

Financial crisis
Long-range dependence
Power-law distribution
Regime switching
Regime-dependent belief

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10.1016/j.jebo.2012.02.008

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title = "Financial crises and regime-dependent dynamics",

abstract = "Generalized with the regime-dependent beliefs and regime-switching dynamics, the simple market-maker framework established by Day and Huang (1990) is capable to model all types of crises, that is, sudden crisis, disturbing crisis and smooth crisis, and to offer economic and dynamic justifications on how and why these crises appear. Moreover, the model simulations verify the salient qualitative and statistical properties commonly observed in the real financial data such as fat tails, volatility clustering, long range dependence, leverage effect and other stylized facts. Additionally, the model replicates the various chart patterns widely applied in the technical analysis. {\textcopyright} 2012 Elsevier B.V..",

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AU - Zheng, Huanhuan

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N2 - Generalized with the regime-dependent beliefs and regime-switching dynamics, the simple market-maker framework established by Day and Huang (1990) is capable to model all types of crises, that is, sudden crisis, disturbing crisis and smooth crisis, and to offer economic and dynamic justifications on how and why these crises appear. Moreover, the model simulations verify the salient qualitative and statistical properties commonly observed in the real financial data such as fat tails, volatility clustering, long range dependence, leverage effect and other stylized facts. Additionally, the model replicates the various chart patterns widely applied in the technical analysis. © 2012 Elsevier B.V..

AB - Generalized with the regime-dependent beliefs and regime-switching dynamics, the simple market-maker framework established by Day and Huang (1990) is capable to model all types of crises, that is, sudden crisis, disturbing crisis and smooth crisis, and to offer economic and dynamic justifications on how and why these crises appear. Moreover, the model simulations verify the salient qualitative and statistical properties commonly observed in the real financial data such as fat tails, volatility clustering, long range dependence, leverage effect and other stylized facts. Additionally, the model replicates the various chart patterns widely applied in the technical analysis. © 2012 Elsevier B.V..

KW - Financial crisis

KW - Long-range dependence

KW - Power-law distribution

KW - Regime switching

KW - Regime-dependent belief

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DO - 10.1016/j.jebo.2012.02.008

M3 - RGC 21 - Publication in refereed journal

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SP - 445

EP - 461

JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

IS - 2-3

ER -

Financial crises and regime-dependent dynamics

Abstract

Bibliographical note

Funding

UN SDGs

Research Keywords

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