Evolutionary Dynamics in Financial Markets With Many Trader Types

W.A. Brock, Cars Hommes and Florian Wagener

No 01-01, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: This paper develops the notion of a Large Type Limit (LTL) describing the average behavior of adaptive evolutionary systems with many trader types. It is shown that generic and persistent features of adaptive evolutionary systems with many trader types are well described by the large type limit. Stability and bifurcation routes to instability and strange attractors are studied. An increase in the ``intensity of adaption'' or in the diversity of beliefs may lead to deviations from the RE fundamental benchmark and excess volatility. Simple examples of LTL are able to generate important stylized facts, such as volatility clustering and long memory, observed in real financial data.

Date: 2001
New Economics Papers: this item is included in nep-evo and nep-fmk
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://cendef.uva.nl/binaries/content/assets/subsi ... 01.pdf?1417180324756 (application/pdf)

Related works:
Working Paper: Evolutionary dynamics in financial markets with many trader types (2001)
Working Paper: Evolutionary dynamics in financial markets with many trader types (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ams:ndfwpp:01-01

Access Statistics for this paper

More papers in CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands. Contact information at EDIRC.
Bibliographic data for series maintained by Cees C.G. Diks ().