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Uncertainty about fundamental and pessimistic traders: a piecewise-linear maps approach

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  • Giovanni Campisi
  • Silvia Muzzioli
  • Fabio Tramontana

Abstract

We analyze a financial market model with heterogeneous interacting agents where two groups of fundamentalists are taken into account. We assume that agents are homogeneous in their trading strategy, but heterogeneous in their belief about the fundamental value of the asset. Moreover, agents are characterized by an underlying pessimism due to the uncertainty about the fundamental value. As a consequence, the dynamics of our model is driven by a one-dimensional piecewise-linear continuous map with three linear branches. We investigate the bifurcation structures in the parameter space of the map and describe the endogenous fear and greed market dynamics arising from our asset-pricing model.

Suggested Citation

  • Giovanni Campisi & Silvia Muzzioli & Fabio Tramontana, 2021. "Uncertainty about fundamental and pessimistic traders: a piecewise-linear maps approach," Department of Economics 0186, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    • Handle: RePEc:mod:depeco:0186
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    References listed on IDEAS

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