Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7358656 | Journal of Economic Dynamics and Control | 2018 | 18 Pages |
Abstract
We introduce time-varying measures of price discovery based on underlying profit maximizing behavior by combining the heterogeneous agent modelling literature with the market microstructure literature. We set up a heterogeneous agent model with arbitrageurs and trend chasers (chartists), and allow agents to switch between the strategies conditional on recent forecasting performance. Estimation of the model on Canadian-US cross-listed stocks on high-frequency data shows that there is significant heterogeneity and switching, causing ample variation in the information processing capacity of markets.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Bart Frijns, Remco C.J. Zwinkels,