Journal of Evolutionary Economics

, Volume 27, Issue 5, pp 1071–1094 | Cite as

The adaptiveness in stock markets: testing the stylized facts in the DAX 30

  • Xue-Zhong He
  • Youwei Li
Regular Article


By testing a simple asset pricing model of heterogeneous agents to characterize the power-law behavior of the DAX 30 from 1975 to 2007, we provide supporting evidence on empirical findings that investors and fund managers use combinations of fixed and switching strategies based on fundamental and technical analysis when making investment decisions. A mechanism analysis based on the calibrated model provides a behavioral insight into the explanatory power of rational switching behavior of investors on the volatility clustering and long range dependence in return volatility.


Adaptive switching Fundamental and technical analysis Stylized facts Power-law Tail index 

JEL Classification

C15 D84 G12 



This research was initiated and conducted during He’s visit at Queen’s University Belfast and Li’s visit to Quantitative Finance Research Center at University of Technology Sydney, whose hospitality they gratefully acknowledge. Financial support from the Australian Research Council (ARC) under discovery grant (DP130103210) is also gratefully acknowledged. We benefited from detailed comments of two anonymous referees, Roberto Dieci (the Guest Editor), Michael Goldstein and Cars Hommes on the earlier version of this paper. The usual caveats apply.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  1. 1.Business School, Finance Discipline GroupUniversity of Technology SydneySydneyAustralia
  2. 2.School of ManagementQueen’s University of BelfastBelfastUK

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