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Speculative dynamics in a time-delay model of asset prices

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  • Dibeh, Ghassan

Abstract

In this paper, a time-delay model of speculative asset markets is developed to investigate the effect of time delays on the dynamics of asset prices. The basic model investigates the effect of time delays in the chartists expectations function on the deviation of asset prices from their fundamental value. A nonlinear model is then solved showing that limit cycles may exist explaining the persistence of these deviations in speculative markets. Time delays are shown to have an effect on the generation of limit cycles. The model is also extended to include endogenous wealth dynamics. Solutions to the model show that time delays affect the time evolution of the chartists and fundamentalists share of wealth.

Suggested Citation

  • Dibeh, Ghassan, 2005. "Speculative dynamics in a time-delay model of asset prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 199-208.
    • Handle: RePEc:eee:phsmap:v:355:y:2005:i:1:p:199-208
    DOI: 10.1016/j.physa.2005.02.084
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    References listed on IDEAS

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    1. C. H. Hommes, 2001. "Financial markets as nonlinear adaptive evolutionary systems," Quantitative Finance, Taylor & Francis Journals, vol. 1(1), pages 149-167.
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    Citations

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    Cited by:

    1. Ghassan Dibeh & Haidar Harmanani, 2012. "A Stochastic Chartist–Fundamentalist Model with Time Delays," Computational Economics, Springer;Society for Computational Economics, vol. 40(2), pages 105-113, August.
    2. Ying Qu & Junjie Wei, 2010. "Global Hopf Bifurcation Analysis for a Time-Delayed Model of Asset Prices," Discrete Dynamics in Nature and Society, Hindawi, vol. 2010, pages 1-17, March.
    3. Luca Guerrini & Akio Matsumoto & Ferenc Szidarovszky, 2018. "A heterogeneous agent model of asset price dynamics with two time delays," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(2), pages 379-397, November.
    4. Dibeh, Ghassan, 2007. "Contagion effects in a chartist–fundamentalist model with time delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 52-57.
    5. Wang, Luxuan & Niu, Ben & Wei, Junjie, 2016. "Dynamical analysis for a model of asset prices with two delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 447(C), pages 297-313.
    6. Dibeh, Ghassan & Harmanani, Haidar M., 2007. "Option pricing during post-crash relaxation times," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 380(C), pages 357-365.
    7. Loretti I. Dobrescu & Mihaela Neamtu & Gabriela Mircea, 2016. "Asset Price Dynamics in a Chartist-Fundamentalist Model with Time Delays: A Bifurcation Analysis," Discrete Dynamics in Nature and Society, Hindawi, vol. 2016, pages 1-15, February.
    8. Lee, Min-Ku & Kim, Jeong-Hoon & Kim, Joocheol, 2011. "A delay financial model with stochastic volatility; martingale method," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(16), pages 2909-2919.

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