Complexity with Heterogeneous Fundamentalists and a Multiplicative Price Mechanism
AbstractIn contrast with the canonical models, Naimzada and Ricchiuti (2008, 2009) show that the interaction of groups of agents who have the same trading rule but present different beliefs about the fundamental value could be a source of instability in financial markets. Differently from Naimzada and Ricchiuti (2008, 2009), we assume the market maker employs a so-called multiplicative price mechanism (Tuinstra, 2002 and Zhu et al., 2009). We show that the occurrence of heterogeneity has an ambiguous role: it may either stabilize or destabilize the market.
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Bibliographic InfoPaper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2013_03.rdf.
Length: 18 pages
Date of creation: 2013
Date of revision:
mathematical economics; chaos; heterogeneous interacting agents; financial markets.;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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