Abstract
This paper uses a simple stochastic market fraction (MF) asset pric-ing model to investigate market dominance, profitability, and how traders adoptingfundamental analysis or trend following strategies can survive under various marketconditions in the long/short-run. This contrasts with the modern theory of financewhich relies on the paradigm of utility maximizing representative agents and ratio-nal expectations assumptions which some contemporary theorists regard as extreme.This school of thought would predict that trend followers will be driven out of themarkets in the long-run. Our analysis shows that in a MF framework this is notnecessarily the case and that trend followers can survive in the long-run.
| Original language | English |
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| Title of host publication | Natural Computing in Computational Finance |
| Editors | Anthony Brabazon, Michael O'Neill |
| Publisher | Springer |
| Pages | 253-269 |
| ISBN (Print) | 978-3-540-77476-1 |
| Publication status | Published (in print/issue) - 2008 |