Market Sentiment, Technical Analysis And Investor Behavior Patterns

Traditional financial theory holds that the asset price is entirely determined by the fundamentals, and investors make completely rational investment decisions totally based on fundamentals. However, with the rapid development of financial markets, program trading and high-frequency trading and other new trading patterns have emerged, which shows that factors other than fundamentals could also have an important impact on asset price in financial markets. And thus the study of non-fundamental factors on the financial markets becomes more and more important for both market regulation and investment decision.For this understanding, of all non-fundamental factors, this paper focus on market sentiment and technical analysis to explore these non-fundamental factors affecting the principle of asset prices, the impact on investor behavior and the financial market price formation mechanism and resource allocation efficiency. Then in the full study on the basis of these trading strategies proposed to test the reasonableness of such knowledge. In the analysis, the paper agent-based modeling method, set the behavior of individual investors and make it interactive interactive thus obtained the overall impact of the market, so that micro-analysis with more comprehensive basis.This chapter first study involved a literature review related fields. The first section of chapter efficient market hypothesis, behavioral finance, fractal market hypothesis and collaboration market hypothesis and other theories on the financial markets are reviewed, a brief introduction of the current research progress. Then in the second section of this article with agent-based modeling theory and the results are reviewed. Section?is part of a comprehensive analysis of the above two that the current theories and research methods related to the characteristics and shortcomings.The third to the fifth chapter discussed the impact of market sentiment. Chapter?improved by building a herd behavior model, proves that the market prices are set by fundamentals and market sentiment common decision; then set by adjusting the model parameters to study several policies could impact the market. Further analysis of the basic schools and the Graham analysis for the representative of the academic school were compared, pointing out the difference between short-term and long-term stock flow analysis of the different mood in the market affect the market price of the situation, short-term flows analysis is invalid.Chapter IV assume that investors have been fully aware of the sentiment of the market price, which based on "subjective judgments of all investors in the average fundamentals" rather than fundamental investment decision itself. Model run results show that rational behavior of investors at this time but led to asset price bubbles, and continuous change in the fundamentals will worsen with the severity of asset price bubbles. In other words, not only should pay attention to the extent of information disclosure, information disclosure should also pay attention to the way published to avoid continuous good (bad) news to investors ability to judge misleading.Chapter?and?from the model based on the discussion of "overreacting" and "inadequate response" relationship. That the reaction is too absolute, inevitable, and inadequate response is relative, accidental. Usually based on overreaction strategy is to build momentum strategy, which carried out previous research has not reached the same conclusion. This paper argues that the analysis of momentum strategies often for months or even years period, we must consider fundamental changes. Therefore, this article will be fundamental analysis combined with the momentum strategy and build an empirical analysis of trading strategies. The results show that if fundamentals are good stocks to buy, you should select the momentum effect of stock; and if the momentum effect to invest, you should invest in companies with poor fundamentals. This model run results are consistent with our everyday experience, and also proved the conclusion of Chapter?and?.Chapter VI-VIII discussed the impact of technical analysis. A lot of research shows that technical analysis is applied in a series of financial markets have been widely used. Chapter VI of the model agent-based modeling method and a new combination of classical asset pricing model, and the use of genetic algorithm simulated trading strategy the trader to its survival of the fittest, and proved that the existence of technical analysis of market circumstances, the use of technology analysis of the best traders in terms of a balanced, wide application of technical analysis but also increased the risk of asset price bubbles produced. Then by analyzing the principles of technical analysis, technical analysis is to follow the trend that has advantages. In this sense, the momentum strategy is consistent with the technical analysis. But both in the analysis of the different time span, leading to momentum strategies can not be divorced from fundamentals, while technical analysis is to some extent, independent role to play.Chapter?of the effect of the asymmetry from the news paper studies the fundamentals and technical interaction and their relationship. Empirical results show that under different technical response to the market fundamentals significantly different, it is because of the rise in the market, investors were encouraged by the hope and optimism, while in the down period, but also controlled by fear. These irrational factors have distorted the market s ability to correct the news. Fundamental analysis of the specific assets can only be a longer-term price changes in the general case, while technical analysis can span more than a variety of assets, the relative precision of the analysis, so the technical analysis to some extent to fill the fundamental analysis the blank and short-term pricing mechanism have important implications.After two chapters?and?of the analysis can be concluded that technical analysis is not only to a certain extent, independent role, but also for short-term price formation mechanism is more important than the impact of fundamentals. If this conclusion is correct, then should be able to fully develop trading strategies based on technical analysis. Chapter?of foreign common Donchian channel breakout system has been improved and optimized, for China's commodity futures market in the 15-minute analysis cycle tests on the sample and variety of cross-market testing. Results show the effectiveness of the strategy. In addition, the author of the system was tested for up to two years of a firm offer to prove that the system can be put into practical application. These are Chapters VI and VII proved correctness of the conclusionFinally, in Chapter?, the summary of the full text of the main conclusions given that the basic factors that determine long-term value of assets; price fluctuates around value, not full market can distort this relationship and lead to systemic risk, fundamental changes have continued will produce systematic deviations between the two; market sentiment and technical analysis will affect the price of short-term fluctuations, both of which have internal consistency. Then the results in this study based on the regulatory authorities and traders were made and recommendations. This paper argues that financial regulators should recognize that rises and falls is a natural attribute of the financial market, should respect the real economy and the virtual economy of different operating rules, to build a firewall between the two, to ensure the healthy development of the real economy, while not the real economy constraints, the virtual economy can be further developed. Of traders, it should be non-fundamental factors on the impact of asset prices have a clear understanding of the concept of superstition to avoid a specific, objective circumstances of departure from their own choose their own trading strategies.