Summary
In this paper, we propose a new model of asset prices which takes account of the investment strategies of three different kinds of agents: the market-makers, who operate rationally on the basis of the asset fundamentals, the smart buy-and-sell agents, who intervene when the prices reach particular levels and the non-smart buy-and-sell agents, who trade infrequently, mainly following psychological motivations. The different behavior of these groups of agents can determine temporary inefficiences on financial markets and we show that, by considering these inefficiences, it is possible to improve forecasting of asset prices.
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This paper was presented at the XXXIX Scientific Meeting of The Italian Statistical Society held in Sorrento, April 1998.
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Gardini, A., Cavaliere, G. & Costa, M. A new approach to stock price modelling and the efficiency of the Italian stock exchange. J. Ital. Statist. Soc. 8, 25 (1999). https://doi.org/10.1007/BF03178939
DOI: https://doi.org/10.1007/BF03178939