Prague Economic Papers 2007, 16(1):38-54 | DOI: 10.18267/j.pep.296

Wavelet Decomposition of the Financial Market

Lukáš Vácha, Miloslav Vošvrda
Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic and Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague (vosvrda@utia.cas.cz)

A heterogeneous agents model with the Worst Out Algorithm (WOA) was considered for obtaining more realistic market conditions. The WOA replaces periodically the trading strategies that have the lowest performance level of all strategies presented on the market by the new ones. New strategies that enter on the market have the same stochastic structure as an initial set of strategies. This paper shows, by wavelets applications, strata influences of the trading strategies with the WOA.

Keywords: heterogeneous agents model with stochastic memory, worst out algorithm, wavelet, agents' trading strategies
JEL classification: C61, D81, G12, G14

Published: January 1, 2007  Show citation

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Vácha, L., & Vošvrda, M. (2007). Wavelet Decomposition of the Financial Market. Prague Economic Papers, 16(1), 38-54. doi: 10.18267/j.pep.296
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