Dynamic Effects of Increasing Heterogeneity in Financial Markets

Ahmad Naimzada and Giorgio Ricchiuti

No 111, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: Developing a model in which heterogeneity arises among two groups of fundamentalists that follow gurus, we focus on the dynamic effects of increasing heterogeneity. We show that an increasing degree of heterogeneity leads firstly (i) to insurgence of a pitchfork bifurcation and, secondly (ii) generates, together with a larger reaction to misalignment of both market makers and agents, the appearance of a periodic, or even, chaotic, price fluctuation (trough an homoclinic bifurcation, [1]).

Keywords: mathematical economics; chaos; heterogeneous interacting agents; financial markets (search for similar items in EconPapers)
JEL-codes: C61 D84 G11 G12 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2007, Revised 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://repec.dems.unimib.it/repec/pdf/mibwpaper111.pdf First version, 2007 (application/pdf)

Related works:
Journal Article: Dynamic effects of increasing heterogeneity in financial markets (2009)
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:mib:wpaper:111

Access Statistics for this paper

More papers in Working Papers from University of Milano-Bicocca, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Matteo Pelagatti ().