Bifurcation Routes in Financial Markets

Author Miloslav
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Author Miloslav: Vosvrda Academy of Sciencews of the Czech Republic

Finance from University Library of Munich, Germany

Abstract: The heterogeneity of expectations among traders introduces an important non-linearity into the financial markets. In a series of papers, Brock and Hommes, propose to model economic and financial markets as adaptive belief systems. Asset price fluctuations in adaptive belief systems are characterized by phases of close-to-the-fundamental-price fluctuations, phases of optimism where most agents follow an upward price trend, and phases of pessimism with small or large market crashes. In this paper will be discussed the EMH benchmark and forecasting rules of fundamentals and trend extrapolators. Some illustrative examples are supplied.

Keywords: heterogeneity of expectations; adaptive belief systems; forecasting rules; fundamentals; trend extrapolators equations; limit cycles; asymptotical stability (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2001-09-07
New Economics Papers: this item is included in nep-fmk and nep-mfd
Note: Type of Document - PDF; prepared on PC; to print on HP; pages: 7; figures: included/request from author/draw your own
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0109001

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