An Evolutionary Approach in Financial Forecasting
30 Pages Posted: 29 May 2011
Date Written: May 26, 2011
Abstract
We develop an adaptive learning game to rethink efficient markets. We use the stochastically stable state of this game, which is a mixed Nash equilibrium, to form an adaptive expectation model that provides an estimate of the confidence interval for prices on the next day. The estimate is most accurate in the time of bubbles and crises, when rational expectations no longer fully hold.
Keywords: Rational Expectation, Volatility, Adaptive Learning, Price Forecast
JEL Classification: C22, C73, G12, G14, G17
Suggested Citation: Suggested Citation
Le, Nhat, An Evolutionary Approach in Financial Forecasting (May 26, 2011). Available at SSRN: https://ssrn.com/abstract=1853046 or http://dx.doi.org/10.2139/ssrn.1853046
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