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Convergence of fundamentalists and chartists’ expectations: An alarm for stock market crash

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  • Bolgorian, Meysam
  • Raei, Reza

Abstract

We construct a network of the Tehran stock market based on the cross-correlation of trading volume of stocks both for fundamentalists and chartists. In order to investigate the dynamics of expectations of fundamentalists and chartists over time we introduced a homogeneity coefficient. Our results show that in the Tehran Stock Exchange (TSE) which is an emerging market, chartists in comparison with fundamentalists more strongly believe the stocks’ co-movements. We also found that in a bull market (booming period), the optimism of fundamentalists and chartists about the similarity of stocks’ performance diverge from each other while in a bear market (recession period) both groups of traders have approximately same level of pessimism about the simultaneous collapse of stock prices.

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  • Bolgorian, Meysam & Raei, Reza, 2010. "Convergence of fundamentalists and chartists’ expectations: An alarm for stock market crash," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(18), pages 3822-3827.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:18:p:3822-3827
    DOI: 10.1016/j.physa.2010.05.017
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