Microeconomic co-evolution model for financial technical analysis signals
Author(s)
Rotundo, Giulia
Ausloos, Marcel
Date Issued
2007
Type
Article
Abstract
Technical analysis (TA) has been used for a long time before the availability of more sophisticated instruments for
financial forecasting in order to suggest decisions on the basis of the occurrence of data patterns. Many mathematical and statistical tools for quantitative analysis of financial markets have experienced a fast and wide growth and have the power for overcoming classical TA methods. This paper aims to give a measure of the reliability of some information used in TA by exploring the probability of their occurrence within a particular microeconomic agent-based model of markets, i.e., the
co-evolution Bak–Sneppen model originally invented for describing species population evolutions. After having proved
the practical interest of such a model in describing financial index so-called avalanches, in the prebursting bubble time rise, the attention focuses on the occurrence of trend line detection crossing of meaningful barriers, those that give rise to some usual TA strategies. The case of the NASDAQ crash of April 2000 serves as an illustration.
Citation
10. G. Rotundo, M. Ausloos, “Microeconomic co-evolution model for financial technical analysis signals”, Physica A ISSN: 0378-4371 373 (2007) 569–585.
Subjects
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