Could Markets' Equilibrium Sets Be Fractal Attractors?
The assumption that markets are positive linear structures moving toward stable fixed-point equilibria is not supproted by empirical investigations.This note reformulates the purest and the simplestof all Walrasian models, i. e.,a pure exchange economy, and shows that even such a simple market moves toward a compact time-invariant set of prices due to the constant destruction and creation of excess demands under the impulsion of self-interested agents with strong monotone preferences. Fractal attractors better explain continuous market fluctuations, 'black swans', and the flawed risk assessments of market risks of the financial engineers of Wall Street.
|Date of creation:||27 Feb 2009|
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- Frank, Murray & Gencay, Ramazan & Stengos, Thanasis, 1988. "International chaos?," European Economic Review, Elsevier, vol. 32(8), pages 1569-1584, October.
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- C-René Dominique, 2008.
"Walrasian Solutions Without Utility Functions,"
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EERI_RP_2008_10, Economics and Econometrics Research Institute (EERI), Brussels.
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