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A Stochastic Version of Zeeman's Market Model

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  • Rheinlaender Thorsten

    ()
    (London School of Economics)

  • Steinkamp Marcus

    ()
    (Humboldt University Berlin)

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    Abstract

    In a heterogenous agents framework, we study a randomized version of Zeeman's market model with fundamental and momentum traders. Using methods from random dynamical systems theory, we examine convergence properties of invariant measures which correspond to market equilibria. It turns out that due to a stochastic stabilisation effect the market stays stable up to some critical value of speculative activity. If this threshold is surpassed, sudden trend reversals are possible without being induced by some exogenous shock.

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    File URL: http://www.degruyter.com/view/j/snde.2004.8.4/snde.2004.8.4.1111/snde.2004.8.4.1111.xml?format=INT
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    Bibliographic Info

    Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

    Volume (Year): 8 (2004)
    Issue (Month): 4 (December)
    Pages: 1-25

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    Handle: RePEc:bpj:sndecm:v:8:y:2004:i:4:n:4

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    Web page: http://www.degruyter.com

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    Cited by:
    1. Cars H. Hommes, 2005. "Heterogeneous Agent Models in Economics and Finance," Tinbergen Institute Discussion Papers 05-056/1, Tinbergen Institute.
    2. Rosser Jr., J. Barkley, 2007. "The rise and fall of catastrophe theory applications in economics: Was the baby thrown out with the bathwater?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3255-3280, October.
    3. Chiarella, Carl & He, Xue-Zhong & Zheng, Min, 2011. "An analysis of the effect of noise in a heterogeneous agent financial market model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 148-162, January.
    4. Cars H. Hommes, 2005. "Heterogeneous Agent Models in Economics and Finance," Tinbergen Institute Discussion Papers 05-056/1, Tinbergen Institute.
    5. Chiarella, Carl & He, Xue-Zhong & Wang, Duo & Zheng, Min, 2008. "The stochastic bifurcation behaviour of speculative financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3837-3846.

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