IDEAS home Printed from https://ideas.repec.org/a/spr/eurphb/v20y2001i4d10.1007_s100510170250.html
   My bibliography  Save this article

Transition from coherence to bistability in a model of financial markets

Author

Listed:
  • R. D'Hulst

    (Department of Mathematical Sciences, Brunel University, Uxbridge, Middlesex UB8 3PH, UK)

  • G.J. Rodgers

    (Department of Mathematical Sciences, Brunel University, Uxbridge, Middlesex UB8 3PH, UK)

Abstract

We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite its simplicity, it can mimic a size effect comparable to a crash localized in time. Two extensions of this model are presented that allow to simulate the demand process. One of these extensions has a coherent stable equilibrium and is self-organized, while the other has a bistable equilibrium, with a spontaneous segregation of the population of agents. A new model is introduced to generate a transition between those two equilibriums. We show that the coherent state is dominant up to an equal mixing of the two extensions. We focus our attention on the microscopic structure of the investment rate, which is the main parameter of the original model. A constant investment rate seems to be a very good approximation.

Suggested Citation

  • R. D'Hulst & G.J. Rodgers, 2001. "Transition from coherence to bistability in a model of financial markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 20(4), pages 619-625, April.
    • Handle: RePEc:spr:eurphb:v:20:y:2001:i:4:d:10.1007_s100510170250
    DOI: 10.1007/s100510170250
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s100510170250
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s100510170250?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eurphb:v:20:y:2001:i:4:d:10.1007_s100510170250. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.