Complexity with Heterogeneous Fundamentalists and a Multiplicative Price Mechanism

Ahmad Naimzada and Giorgio Ricchiuti

Economic Notes, 2014, vol. 43, issue 3, 233-247

Abstract: type="main" xml:lang="en">

In contrast with the canonical models of financial markets with heterogeneous agents,, Naimzada and Ricchiuti, ( , ) show that the interaction of groups of agents who have the same trading rule but present different beliefs about the fundamental value could be a source of instability. In this paper, differently from, Naimzada and Ricchiuti, ( , ), we assume that the market maker employs a so-called multiplicative price mechanism (Tuinstra, ; Zhu et al., ). We show that the occurrence of heterogeneity has an ambiguous role: it may either stabilize or destabilize the market.

Date: 2014
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Working Paper: Complexity with Heterogeneous Fundamentalists and a Multiplicative Price Mechanism (2013)
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