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Steady states, stability and bifurcations in multi-asset market models

Roberto Dieci, Noemi Schmitt and Frank Westerhoff ()
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Roberto Dieci: University of Bologna
Noemi Schmitt: University of Bamberg

Decisions in Economics and Finance, 2018, vol. 41, issue 2, 357-378

Abstract: Abstract We provide a full analytical treatment of a multi-asset market model in which speculators have the choice between two risky and one safe asset. As it turns out, the dynamics of our model is driven by a four-dimensional nonlinear map and may undergo a transcritical, flip or Neimark–Sacker bifurcation. While the first bifurcation is associated with an undervaluation of the risky assets, the latter two may trigger (complex) endogenous dynamics. To facilitate our analysis, we first study a simpler two-dimensional setup of our model in which speculators can only switch between one risky and one safe asset.

Keywords: Multi-asset markets; Replicator dynamics; Nonlinear maps; Stability and bifurcation analysis (search for similar items in EconPapers)
JEL-codes: D84 G12 G41 (search for similar items in EconPapers)
Date: 2018
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