Bifurcation Routes in Financial Markets
The 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.
|Date of creation:||07 Sep 2001|
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- William A. Brock & Cars H. Hommes, 1997.
"A Rational Route to Randomness,"
Econometric Society, vol. 65(5), pages 1059-1096, September.
- Hommes, C.H., 2000.
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00-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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- Cars H. Hommes, 2001. "Financial Markets as Nonlinear Adaptive Evolutionary Systems," Tinbergen Institute Discussion Papers 01-014/1, Tinbergen Institute.
- James Tobin, 1975.
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Cowles Foundation Discussion Papers
387, Cowles Foundation for Research in Economics, Yale University.
- Miloslav Vošvrda, 2001.
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Bulletin of the Czech Econometric Society,
The Czech Econometric Society, vol. 8(14).
- Karel Sladký & Jan Kodera & Miloslav Vošvrda, 1999. "Sensitivity And Stability In Dynamical Economic Systems," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 6(9).
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