Bifurcation Routes in Financial Markets
AbstractThe heterogeneity of expectations among traders introduces an important non-linearity into the financial markets. In a series of papers, Brock and Hommes, propose to model economic and financial markets as adaptive belief systems. Asset price fluctuations in adaptive belief systems are characterized by phases of close-to-the-fundamental-price fluctuations, phases of optimism where most agents follow an upward price trend, and phases of pessimism with small or large market crashes. In this paper will be discussed the EMH benchmark and forecasting rules of fundamentals and trend extrapolators. Some illustrative examples are supplied.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0109001.
Length: 7 pages
Date of creation: 07 Sep 2001
Date of revision:
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heterogeneity of expectations; adaptive belief systems; forecasting rules; fundamentals; trend extrapolators equations; limit cycles; asymptotical stability;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-09-10 (All new papers)
- NEP-FMK-2001-09-10 (Financial Markets)
- NEP-MFD-2001-09-10 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Tinbergen Institute Discussion Papers
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- Hommes, C.H., . "Financial Markets as Nonlinear Adaptive Evolutionary Systems," CeNDEF Working Papers 00-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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