 Dynamics of moving average rules in a continuous-time financial market modelXuezhong (Tony) He () and Min Zheng Journal of Economic Behavior & Organization, 2010, vol. 76, issue 3, 615-634 Abstract: Within a continuous-time framework, this paper proposes a stochastic heterogeneous agent model (HAM) of financial markets with time delays to unify various moving average rules used in discrete-time HAMs. The time delay represents a memory length of a moving average rule in discrete-time HAMs. Intuitive conditions for the stability of the fundamental price of the deterministic model in terms of agents' behavior parameters and memory length are obtained. It is found that an increase in memory length not only can destabilize the market price, resulting in oscillatory market price characterized by a Hopf bifurcation, but also can stabilize an otherwise unstable market price, leading to stability switching as the memory length increases. Numerical simulations show that the stochastic model is able to characterize long deviations of the market price from its fundamental price and excess volatility and generate most of the stylized facts observed in financial markets. Keywords: Asset; price; Financial; market; behavior; Heterogeneous; beliefs; Stochastic; delay; differential; equations; Stability; Bifurcations; Stylized; facts (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:76:y:2010:i:3:p:615-634 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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