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Heterogeneity of Traders as a Source of Exchange Rate Volatility: Some Simulation Results Based on a Descriptive Model

Journal of Financial Studies

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Title Heterogeneity of Traders as a Source of Exchange Rate Volatility: Some Simulation Results Based on a Descriptive Model
 
Creator Imad A. Moosa
Abul Shamsuddin
 
Description We argue, on the basis of a descriptive model, that exchange rate volatility can be explained in terms of the heterogeneity of traders with respect to their trading strategies. These strategies are based on expectation formation mechanisms, trading rules and fundamentals. Within these broad categories traders are then classified into 19 different types. Each type is assigned a market weight that reflects the profitability of the underlying trading strategy, and these weights are used to simulate an exchange rate series. It is found that the actual and simulated series exhibit the same volatility patterns and that they belong to the same statistical distribution. It is concluded that trader heterogeneity can generate exchange rate volatility.
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
Date 2011-06-03
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011143
 
Source Journal of Financial Studies; Vol 11, No 2 (2003); 43
財務金èžå­¸åˆŠ; Vol 11, No 2 (2003); 43
 
Language —