Explore The Psychological Expectations Of The Traders On The Exchange Rate Affect The Quantitative

The determination of exchange rate in the research of international finance is one of the important questions. Economists have been trying to find out what the factors that determine the exchange rate are. Firstly, the traditional theory of exchange rate thinks that exchange rate is determined by economic fundamentals. Namely, the properly level of exchange rate is made by basic economic factors. When the exchange rate of the foreign exchange market deviating from equilibrium, there will be arbitrage and it will promote exchange rate back to equilibrium that determined by economic fundamentals rapidly. Secondly, the behavioral finance theory of exchange rate suggests a new perspective on exchange rate in the end of last century. It thinks that exchange rate is made by the heterogeneity of dealers. In the other words, exchange rate is resulted by the interacting by the heterogeneity expectation of dealers. In the opinion of the traditional theory of exchange rate which rooted by the equilibrium point, the dealers of the foreign exchange rate will have the consistent expectation when they facing the same information. It will make exchange rate keeping a balanced level, especially in the long time. But the behavioral finance theory of exchange rate does not think so. It regard that the different dealers will have the different expectation even if they facing the same information. In fact, exchange rate is the reflection of the interaction by the heterogeneity expectation of the dealers.Some difficulties of exchange rate fluctuation that can't explain by traditional exchange rate theory can be explained properly by behavioral finance theory of exchange rate. And the assumptions of behavioral finance theory of exchange rate are closer to the reality of the foreign exchange market. So it draws much attention. However, the interpretation on exchange rate fluctuation of behavioral finance theory of exchange rate is mainly a qualitative analysis empirically. It has been a problem to introduce the psychological expectation of dealers into the model of exchange rates and implement the quantitative analysis. Few have been carried on research in this area, especially at home. On the base of behavioral finance, in this paper, a new model is established as a trying to find the method of involving the factor of dealers'expectations. This dissertation assumes that the dealers of the foreign exchange market were divided into fundamental analysts and technical analysts, through the dealers act two types of dealers come to their expectations based on rules for the formation of expectations: Fundamental analysis by equilibrium exchange rate model according to economic fundamentals determine the exchange rate value of the spot exchange rate and fundamentals by examining the exchange value of the departure from the expected return of the formation of the exchange rate, which is expected to function in the psychological factor is constant. Technical analysis by the formation of the exchange rate under the expected exchange rate history chart, technical analysts believe that trends in the formation of the exchange rate movement, its movement in the spatial structure consistent with a golden ratio, technical analysts forecast the expected function of psychological factor is in a golden ratio of variable. Construction of this paper is based on heterogeneous traders expected "fundamentals - Technical Analysis Exchange Rate Model", the weight coefficients of the model applied to fundamental analysis and technical analysis are linked to the expected function, reflecting the heterogeneity of dealers expected interaction. In this paper, the introduction of psychological factors that the exchange rate model is described, and model parameter estimation and testing, is expected to reach a quantitative study on the psychological purpose.The paper consists of ten chapters is divided into four parts.There are three chapters in the first part, which raises the issue, research methods and practical significance of the paper, reviews the existing exchange rate theories. The first chapter is the summing-up of the paper. It advances the questions solved latter in the paper and research objectives to be achieved, and summarizes problem-solving ideas, methods and practical significance of the paper. The second chapter reviews the traditional exchange rate theories, including the purchasing power parity theory, the interest rate parity theory and asset market theory as well as some measurement methods using statistical theory for exchange rate modeling. The chapter is also one of the basic theory in the research. The third chapter describes new trends of the exchange research. Among them, some representative research methods are of great reference.The second part consists of three chapters, which analyze the exchange rate factors and behavioral characteristics of those traders, build the exchange rate model. Among them, the fourth chapter is devoted to introduce behavioral finance theory and research method of exchange rate based on the perspective of it. After referencing to psychological research in the foreign exchange market of Thomas Oberlechner, the fifth chapter analyses the factors determining the exchange rate and foreign exchange market, and the psychological expectation of the traders. The sixth chapter builds the "Fundamentals-Technical Analysis Model of the Exchange Rate" based on the heterogeneous expectation of the traders. That is, on the analysis of expectation methods of fundamental analyst and technical analyst, to form expected functions about the two types of traders. Psychological parameters are put into the functions, which is connected by the application weight coefficients, forming the "Fundamentals-Technical Analysis Model of the Exchange Rate" based on the heterogeneous expectation of the traders.In the third part, analysis, parameter estimating, hypothesis testing and model evaluating for the model called "fundamentals - Technical Analysis of the exchange rate model" are done. This part includes two chapters. In the Chapter VII, the model gives an explanation to the real exchange rate in theory and parameter estimation, test methods are completed. In the Chapter VIII, parameter estimation, testing, analysis and evaluation are accomplished with the data of the euro / dollar exchange rate, then the psychological expectation of dealers is quantized.The fourth part includes two chapters, in which exchange rate forecasting model is constructed in the form of quantitative psychological expectation and a briefly case study is done in Chapter IX, and prospects for future research work in chapter X.