Journal
ECONOMIC MODELLING
Volume 26, Issue 1, Pages 167-176Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.econmod.2008.06.008
Keywords
Information signals; Economic modelling; Non-linear trading strategies; Heteroskedastic Mackey-Glass model
Categories
Ask authors/readers for more resources
Several methods have been developed for filtering seasonal influences and extreme returns in financial and economic time series. The theoretical support for these approaches is rather questionable since it focuses on the effects of shocks on prices and not on their sources. Removing such effects modifies the true generating system of market dynamics because of the non-proportional character of non-linearity. Thus, taking into account that the underlying process of economic time series is highly non-linear we cannot be certain a priori what the impact of new information will be on the dynamic structure of a system. The main contribution of this paper is to demonstrate using the methodology of simulations the eventual distortions in time series data arising from the arrival of news when agents follow non-linear trading strategies. We argue that if news can really modify the dynamical behaviour of a system, then the methodology of filtering exogenous distortions needs to be re-examined. (c) 2008 Elsevier B.V. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available