Title :

Bet against the trend and cash in profits: An agent‑based model of endogenous fluctuations of exchange rates

Author(s) :

Bassi, Federico [Auteur]
Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 [CLERSÉ]
Lang, Dany [Auteur]
Centre d'Economie de l'Université Paris Nord [CEPN]
Almeida Ramos, Raquel [Auteur]
Centre d'Economie de l'Université Paris Nord [CEPN]

Journal title :

Journal of Evolutionary Economics

Volume number :

33

Pages :

p.429 - 472

Publication date :

2023-05

HAL domain(s) :

Sciences de l'Homme et Société/Economies et finances

English abstract : [en]

This paper intends to contribute to the literature on the determinants of exchange rate fluctuations. We build an agent-based model inspired by the literature on behavioral finance and by empirical surveys about the ...
Show more >This paper intends to contribute to the literature on the determinants of exchange rate fluctuations. We build an agent-based model inspired by the literature on behavioral finance and by empirical surveys about the behavior of foreign exchange professionals. In our artificial economy, traders allocate their wealth across heterogeneous assets based on expectations about exchange and interest rate fluctuations. Fundamentalists use both fundamental and technical signals, but overweight the former, while chartists only employ technical signals, and are either trend followers or trend contrarians. Each class of traders represents a fixed share of total traders. We find that the simultaneous co-existence of heterogeneous strategies can explain most stylized facts of foreign exchange markets, despite the absence of short-run switching from less to more profitable rules. Moreover, contrary to the predictions of the Market Selection Hypothesis, we find that heterogeneity of expectations is an essential requirement for traders’ profitability, as no class of traders can dominate the market profitably.Show less >

Language :

Anglais

Peer reviewed article :

Oui

Audience :

Internationale

Popular science :

Non

Administrative institution(s) :

Université de Lille
CNRS
Univ. Littoral Côte d’Opale

Collections :

• Centre Lillois d'Études et de Recherches Sociologiques et Économiques (CLERSE) - UMR 8019

Research team(s) :

Économies et sociétés : développement, richesse, innovation et régulation

Submission date :

2024-01-30T17:04:57Z
2024-01-31T09:59:22Z