 Market stability switches in a continuous-time financial market with heterogeneous beliefsXuezhong (Tony) He, Kai Li, Junjie Wei and Min Zheng Economic Modelling, 2009, vol. 26, issue 6, 1432-1442 Abstract: By considering a financial market of fundamentalists and trend followers in which the price trend of trend followers is formed as a weighted average of historical prices, we establish a continuous-time financial market model with time delay and examine the impact of time delay on market price dynamics. Conditions for the stability of the fundamental price in terms of agents' behavior parameters and time delay are obtained. In particular, it is found that an increase in time delay can not only destabilize the market price but also stabilize an otherwise unstable market price, leading to stability switching as delay increases. These interesting phenomena shed new light in understanding of mechanism on the market stability. When the fundamental price becomes unstable through Hopf bifurcations, sufficient conditions on the stability and global existence of the periodic solution are obtained. Keywords: Asset; price; Fundamentalists; Trend; followers; Delay; differential; equations; Stability; Bifurcations (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:ecmode:v:26:y:2009:i:6:p:1432-1442 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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