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A 'bull and bear' model of interacting financial markets. Part II: dynamics in three dimensions

Author

Listed:
  • Fabio Tramontana

    () (Università Politecnica delle Marche & Dipartimento di Economia e Metodi Quantitativi, Università di Urbino)

  • Laura Gardini

    () (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy))

  • Roberto Dieci

    () (Università di Bologna)

  • Frank Westerhoff

    () (University of Bamberg)

Abstract

In the fi rst part of our paper we proposed a three-dimensional nonlinear dynamic model of interacting stock and foreign exchange markets, jointly driven by the speculative activity of heterogeneous investors. We focused, in particular, on the typical 'bull and bear' scenario that emerges from simpli ed one- and two-dimensional settings. The goal of this part of the paper is to provide a global analysis of the dynamics of the full model. As it turns out, the results we obtained in the fi rst part may serve as a road map to develop an initial understanding of the much more complicated three-dimensional model.

Suggested Citation

  • Fabio Tramontana & Laura Gardini & Roberto Dieci & Frank Westerhoff, 2008. "A 'bull and bear' model of interacting financial markets. Part II: dynamics in three dimensions," Working Papers 0808, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2008.
  • Handle: RePEc:urb:wpaper:08_08
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    File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_08_08.pdf
    File Function: First version, 2008
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    More about this item

    Keywords

    Heterogeneous speculators; bull and bear markets; nonlinear dynamics; homoclinic bifurcations.;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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