News Reaction in Financial Markets within a Behavioral Finance Model with Heterogeneous Agents

@article{Fischer2011NewsRI,
  title={News Reaction in Financial Markets within a Behavioral Finance Model with Heterogeneous Agents},
  author={Thomas Fischer},
  journal={Algorithmic Finance},
  year={2011},
  volume={1},
  pages={123-139}
}
This paper presents a Heterogeneous Agent Model of a financial market with chartist and fundamentalist traders that exhibit bounded rationality and short-term thinking to explain the effect of under and overreaction to news. The existence of the Market Maker’s finite price adjustment speed and the presence of risk aversion lead to the fact that prices do… CONTINUE READING