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|
|Note:||Type of Document - PDF; prepared on PC; to print on HP; pages: 7; figures: included/request from author/draw your own|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Miloslav Vošvrda, 2001.
"Bifurcation Routes And Economic Stability,"
Bulletin of the Czech Econometric Society,
The Czech Econometric Society, vol. 8(14).
- James Tobin, 1975.
"Keynesian Models of Recession and Depression,"
Cowles Foundation Discussion Papers
387, Cowles Foundation for Research in Economics, Yale University.
- Brock, W.A. & Hommes, C.H., 1996.
"A Rational Route to Randomness,"
9530r, Wisconsin Madison - Social Systems.
- 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).
- Hommes, C.H., 2000.
"Financial Markets as Nonlinear Adaptive Evolutionary Systems,"
CeNDEF Working Papers
00-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- C. H. Hommes, 2001. "Financial markets as nonlinear adaptive evolutionary systems," Quantitative Finance, Taylor & Francis Journals, vol. 1(1), pages 149-167.
- Cars H. Hommes, 2001. "Financial Markets as Nonlinear Adaptive Evolutionary Systems," Tinbergen Institute Discussion Papers 01-014/1, Tinbergen Institute.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0109001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.