bulls bears and market sheep abstract a deterministic excess demand model of stock market behavior is presented that generates stochastically fluctuating prices and randomly switching bear and bull markets

statistical equilibrium wealth distributions in an exchange economy with stochastic preferences abstract we describe an exchange market consisting of many agents with stochastic preferences for two goods when individuals are indifferent between goods statistical mechanics predicts that goods and wealth will have steady state gamma distributions simulation studies show that gamma distributions arise for a broader class of preference distributions we demonstrate this mathematically in the limit of large numbers of individual agents these studies illustrate the potential power of a statistical mechanical approach to stochastic models in economics and suggest that gamma distributions will describe steady state wealths for a class of stochastic models with periodic redistribution of conserved quantities journal of economic literature classification numbers c15 c62 c73 d3 d5

agricultural price instability a survey of competing explanations and remedies there are two explanations for agricultural price dynamics one follows cobweb logic and models fluctuations driven by expectation errors but emphasises that these expectations create complex dynamics and possibly chaos the other stems from the rational expectations tradition of dynamics driven by real shocks the empirical evidence tends to support the latter but is not conclusive the rational expectations model generates an optimal dynamic path from which no improvement can be expected from public intervention however if we take account of all the potential market failures in agricultural markets and especially in developing countries this conclusion might require some qualifications although an appropriate policy design for stability has still to be achieved this paper surveys the positive and normative literature on agricultural prices highlighting empirical evidence and identifying remaining unresolved issues

the behavior of prices and inflation an empirical analysis of disaggregat price data this paper analyzes the effects of inflation on the dispersion of prices as well as other aspects of price behavior using disaggregated data on prices of foodstuffs in israel during 1978 84 we find that the effect of expected inflation on intramarket price variability is stronger than the effect of unexpected inflation we show that even in times of high inflation price quotations are not trivially short and price changes are not synchronized across firms these facts taken together confirm that there is some staggering in the setting of prices we find that the distribution of real prices is far from being uniform as many menu cost based models assume or conclude in fact as inflation increases to very high levels this distribution is not even symmetric when the annual inflation rate reaches 130 percent there are equal chances of finding real prices above or below the market average but upward deviations in the real price are further away from zero than downward ones furthermore as the annu

a simple model of endogenous agricultural commodity price fluctuations with storage a debate has been raging for centuries regarding the effects of interannual storage on commodity prices most analysts consider storage to function as a price stabilizer while others place it at the core of an explanation of intriguing features of commodity price series such as skewed distributions most studies have been developed in the context of the theory of competitive storage where random shocks affect supply or demand recently the endogenous chaotic behavior of markets has become another possible hypothesis regarding the origin of commodity price fluctuations we develop a nonlinear cobweb model with intra and interannual storage risk averse agents and adaptive expectations like the theory of competitive storage this nonlinear cobweb model with storage can reproduce some of the stylized facts of agricultural commodity prices autocorrelation of first rank low kurtosis and skewness in addition the effects of storage on price variation are mixed in the presence of interannual storage chaotic price series show less variation compared to a situation without interannual storage but we find that storage contributes to the endogenous volatility of prices by making chaotic dynamics more likely

heterogeneous beliefs and adaptive behaviour in a continuous time asset price model abstract this paper extends the analysis of the seminal work of brock and hommes 1997 brock and hommes 1998 on heterogeneous beliefs and rational routes to randomness in discrete time models to a continuous time model of asset pricing the resulting model characterised mathematically by a system of stochastic delay differential equations provides a unified approach to deal with adaptive behaviour of heterogeneous agents and market stability impact of lagged price used by chartists to form their expectations for the underlying deterministic model we show not only that the result of brock and hommes on rational routes to market instability in discrete time holds in continuous time but also a double edged effect of an increase in lagged price used by the chartists on market stability for the stochastic model we demonstrate that the interaction and boundedly rational behaviour of heterogeneous agents can generate various market phenomena such as bubbles and crashes and replicate stylised facts including volatility clustering and long range dependence in volatility

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

heterogeneous expectations boom bust housing cycles and supply conditions a nonlinear economic dynamics approach abstract we combine a standard stock flow housing market model incorporating explicit relationships between house prices the housing stock and the rent level with a parsimonious expectation formation scheme of housing market investors reflecting an evolving mix of extrapolative and regressive expectation rules the model results in a two dimensional discrete time nonlinear dynamical system based on realistic parameters the model is able to generate endogenous boom bust housing market dynamics with lasting periods of overvaluation and overbuilding we thus exploit our model to investigate how real forces in particular supply conditions interact with expectations driven housing market fluctuations

the rise fall and rise again of industrial location theory m ccann p and sheppard s 2003 the rise fall and rise again of industrial location theory reg studies 37 649 663 in this paper we will argue that new academic fashions new international institutional arrangements new communications technology and new developments in data availability have all renewed the need for a redevelopment of analytical industrial location theory our paper will argue that the microeconomic foundations of industrial location theory must now be reconsidered in particular the methodological basis of traditional industrial location models needs to be reconciled with recent models of clustering the new economic geography literature and also more aggregate systemic levels of analysis we will argue that in order to do this it is necessary first to specify the transactions cost assumptions underlying these various approaches second to adopt broader definitions of spatial transactions costs and third to incorporate environmental characteristics within an orthodox loca

nonlinear dynamics and stock returns simple deterministic systems are capable of generating chaotic output that mimics the output of stochastic systems for this reason algorithms have been developed to distinguish between these two alternatives these algorithms and related statistical tests are also useful in detecting the presence of nonlinear dependence in time series in this article the authors apply these procedures to stock returns and find evidence that indicates the presence of nonlinear dependence on weekly returns from the center for research in security prices value weighted index copyright 1989 by the university of chicago

how much of commodity price behavior can a rational expectations storage model explain a rational expectations competitive storage model was applied to the u s corn market to assess the aptness of this framework in explaining monthly price behavior in an actual commodity market relative to previous models extensive realism was added to the model in terms of how production activities and storage costs are specified by modeling convenience yield backwardation in prices between crop years did not depend on the unrealistic assumption of zero ending stocks our model generated cash prices that were distributed with positive skewness and kurtosis and mean and variance that increased over the storage season comparable to the persistence and the occasional spikes observed in commodity prices futures prices were generated as conditional expectations of cash prices at contract maturity and the variances of futures prices exhibited realistic time to maturity and seasonal patterns model realizations of cash and futures prices over many years were used to demonstrate the wide variety of price behaviors that could be observed in an efficient market with a similar market structure implying that economic and policy implications drawn from short historical samples of prices could be misleading

disequilibrium economic dynamics a post schumpeterian contribution abstract adaptive economizing in a decentralized economy with alternative technologies and scarce resources leads to various kinds of locally unstable behavior economic disequilibrium is the rule in such a world and requires the presence of market mechanisms that make possible continued viability if in addition to local instability economies are also globally unstable as considerable evidence suggests then the discovery and application of new structure is essential a complete dynamic theory of economic change must therefore be based not only on conventional rationality and routinely adapting behavior but on a superior faculty which may perhaps best be called creative intelligence

an economic approach to social capital a standard optimal investment model can be used to analyse an individual s decision to accumulate social capital we analyse six facts that support the predictions of this individual based approach 1 social capital first rises and then falls with age 2 social capital declines with expected mobility 3 social capital rises in occupations with greater returns to social skills 4 social capital is higher among homeowners 5 social connections fall sharply with physical distance 6 people who invest in human capital also invest in social capital we fail to find robust evidence that social capital investments fall with the value of time or that geographic religious groups generate social capital complementarities

regional social capital why it matters malecki e j regional social capital why it matters regional studies social capital refers to a culture of interaction among people with productive economic outcomes social capital promotes regional learning both within a region and beyond as it reinforces openness to the ideas of others regional cultures vary in the degree to which people individually and within their organizations trust and interact with one another which is why regional outcomes vary innovation learning and entrepreneurship key processes of regional development take place largely within and among people as members of companies and territorial organizations innovative milieus industrial districts and knowledge economies are among the regions with extraordinary pools of social capital malecki e j

can a stochastic cusp catastrophe model explain stock market crashes this paper is the first attempt to fit a stochastic cusp catastrophe model to stock market data we show that the cusp catastrophe model explains the crash of stock exchanges much better than other models using the data of u s stock markets we demonstrate that the crash of october 19 1987 may be better explained by cusp catastrophe theory which is not true for the crash of september 11 2001 with the help of sentiment measures such as the index put call options ratio and trading volume the former models the chartists the latter the fundamentalists we have found that the 1987 returns are bimodal and the cusp catastrophe model fits these data better than alternative models therefore we may say that the crash has been led by internal forces however the causes for the crash of 2001 are external which is also evident in much weaker presence of bifurcations in the data in this case alternative models explain the crash of stock exchanges better than the cusp catastrophe model

what explains price volatility changes in commodity markets answers from the world palm oil market abstract what are the sources of commodity price volatility changes based on observation of the palm oil market 1818 1999 our hypothesis is that the superimposition of short distance operators located near the export supply whose expectation horizon is limited to a few weeks and long distance operators further from the export supply whose expectation horizon exceeds six months to one year is responsible for volatility changes and market instability because of the superimposition of expectations horizons volatility grows along with the development of short distance trade we support this hypothesis using a trader behavior model derived from day and huang j econ behavior org 14 1990 299 and day complex economic dynamics vol i mit press cambridge ma our simulation results challenge the argument that trade liberalization and market enlargement necessarily reduce commodity prices volatility

inflexible prices and procyclical productivity hall has shown that with perfect competition and price flexibility total factor productivity measured using labor s share either in revenues or in costs will be acyclical regardless of the level of labor hoarding we show that if firms producing a homogeneous good under constant returns must pick their prices before demand is known both measures of productivity become procyclical the model implies that productivity should be more procyclical the more important is labor hoarding empirically productivity is more procyclical in industries and in nations where labor hoarding appears more important

coordinated bubbles and crashes abstract in a market with information friction investors strategically consider the actions of others and evolutionarily switch between fundamental and technical strategies to maximize their payoffs the collective actions of all investors exert feedback on asset price which affects investors subsequent actions we find that investors have the incentive to adopt fundamental strategy to restore market efficiency only if the mispricing is sufficiently large when investors fail to coordinate on the fundamental strategy market inefficiency increases which blows the bubble as market inefficiency grows the coordination on fundamental strategy strengthens which eventually bursts the bubble

extent and possible causes of intrayear agricultural commodity price volatility wheat corn rice soybeans and cotton experienced higher volatility in the second half of the 2000s for the sample at hand the unit root tests only validate a new period of high volatility for wheat and cotton if in the next couple of years however corn rice and soybeans maintain their higher volatility a new period of high volatility may also be validated statistically regarding the factors driving the intrayear volatility gmm estimates show that commodity market fundamentals i e the stock to use ratio and to a lesser extent the degree of internationalization are the most systematically statistically significant coefficients among commodities over time consecutive low stock to use ratios and a thin international market provoke typically high volatility speculative activity and liquidity in the agricultural derivative market have a stabilizing effect on the spot price if any finally common macro factors significantly impact volatility especially the volatility of petrol and of exchange rates their dispersion importance over the sample is quite sizeable however it is difficult to establish a link between on the one hand loose monetary policy business cycle and inflation and on the other hand commodity price volatility as the sign of the estimated coefficient changes depending on the commodity and the estimated elasticities are quite low

evolution roots and influence of the literature on national systems of innovation a bibliometric account the literature on the national systems of innovation nsi is a relatively new field of research that has spread remarkably in the past 20 years this article offers a complementary quantitative description of the state of the art of the literature based on bibliometric methods by explicitly addressing the roots evolution and influence of nsi literature the exercise shows that over time the rate of published articles was quite irregular and that contributions on nsi have not yet converged to an integrated analytical framework although historically detailed descriptions on nsi showed a noticeable increase in the more recent period 2006 2010 analyses using more formal and diversified quantitative methodologies for assessing the performance of nsi remained lacking reflecting its persisting methodological weaknesses the roots of the nsi literature can be found at the core of innovation studies by certain well known scholars in the area of economics of innovation and science policy research even though publications on nsi are falling in relative importance and are highly concentrated on a small set of countries united kingdom denmark and the united states their influence is global they are cited by authors affiliated in organisations around the world notably in latin america and asia such an influence goes far beyond the area of innovation studies and has resonated in fields such as economic geography environmental studies international business and managerial sciences this demonstrates that the nsi literature is not self referential

complex bubble persistence in closed end country funds abstract we seek to resolve the misspecified fundamental problem in speculative bubbles through examining the behavior of closed end country funds which possess well defined fundamentals based on their net asset values we study six funds during an episode when large premia emerged and subsequently disappeared we apply rescaled range and regime switching tests which reject the no bubble null hypothesis for these premia these results are placed in a complex bubble model framework interpretable according to the big player model

examining the effectiveness of price limits in an artificial stock market abstract this paper proposes an agent based framework to examine the effectiveness of price limits in an artificial stock market the market is composed of many boundedly rational and heterogeneous traders whose learning behavior is represented by a genetic programming algorithm we calibrate the model to replicate several stylized facts observed in real financial markets based on this environment the impacts of price limits are analyzed from the perspectives of volatility price distortion volume and welfare we find that the imposition of price limits possesses both positive and negative effects however compared with the market without price limits appropriate price limits help to reduce volatility and price distortion and increase the liquidity and welfare

the evolution and performance of biotechnology regional systems of innovation the paper maintains that biotechnology regions develop as complex systems they start with star scientists in research universities generating knowledge spillovers then move progressively towards regional technology markets in the process they attract venture capital or modify the behaviour of existing venture capital firms with the addition of biotechnology portfolios the routines of universities are also modified with the addition of intellectual property and technology transfer offices intervening as sellers in the newly created knowledge markets the paper also considers whether companies located in regional agglomerations grow faster than isolated ones and whether companies spun off from universities have a better performance than start ups the study is based on about 90 canadian based publicly quoted biotechnology companies

critical survey the new geographical turn in economics some critical reflections over the past few years a new geographical economics has emerged focused on the spatial agglomeration of industry and the long run convergence of regional incomes several leading names are associated with this geographical turn including paul krugman michael porter robert barro and w brian arthur this new economic geography it is argued here is neither that new nor is it geography instead it is a reworking or re invention using recent developments in formal mathematical mainstream economics of traditional location theory and regional science as such it is quite opposed to and difficult to reconcile with the work on regional development and industrial agglomeration being carried out in economic geography proper

marginal cost pricing when spot markets are complete the standard formulation of a spot market subject to uncertain excess demand uses a tatonnement process that restricts trade until the market clearing price is found here i present a model in which there is no restriction on trade during the process of the resolution of uncertainty about aggregate excess demand the idea is to enlarge the commodity space and define goods by the probability that they will sell in addition to other characteristics the probability of sale characteristic is the spot market analogue of the contingencies under which delivery will take place in the arrow debreu model a failure to distinguish goods by the probability of sale characteristic can lead to the rejection of the competitive paradigm even when everyone is a price taker and the allocation is efficient

inflation and relative price variability abstract the unconditional variance of the rate of nominal price change can always be expressed as a function of the unconditional mean therefore the relationship between the unconditional variance and the unconditional mean cannot be used to distinguish among alternative theories

observational equivalence regional studies and regional science mccann p 2007 observational equivalence regional studies and regional science regional studies 41 1209 1221 this paper considers the methodological and empirical issues raised by the adoption of stylized constructs in the development of regional policy public policies invariably require funding and the greater levels of public data availability and press scrutiny nowadays have led to increasing requirements for policy transparency driven by evidence based policy design implementation monitoring and evaluation at the same time however many current urban and regional policy frameworks are increasingly being based on constructs that do not lend themselves to empirical evaluation therefore there appears to be something of a mismatch this paper discusses these problems and argues that instead of being seen as contradictory one can regard certain aspects of regional analysis as raising topical questions and issues to be examined while other methodological approaches are always required in ord

optimum pricing policy under stochastic inflation we describe aggregate inflation as a stochastic process in which the rate of change of the price level can be positive or zero where the times spent in each state are of random duration this class of processes includes two state markov chains and renewal processes as special cases it is shown that the optimal pricing policy of a monopolistic firm with non convex costs of price adjustment is s s in its real price i e its nominal price relative to the price level a basic certainty equivalence result is proved i e the firm behaves as if it faces a certain and fixed rate of inflation higher than the actual expected rate the difference between the two rates being a risk premium which depends on the real interest rate and the parameters of the stochastic process one can thus apply previous results from the case of certainty sheshinski and weiss review of economic studies 1977 to obtain comparative static results in particular one finds that an increase in the variance of expected inflation leads firms to choose a pricing policy with larger amplitude in real price the paper also addresses the question of consistency in firms expectations when the price level is determined by the firms actions in this paper we consider pricing policies of individual firms in an inflationary environment each firm expects the general price level to increase and must determine the rate of increase of its own price it is assumed that the firm incurs an adjustment cost when it changes its nominal price consequently firms choose to change prices occasionally rather than continuously

survey evidence on diffusion of interest and information among investors abstract questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications it was found that direct interpersonal communications are very important in investor decisions questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word of mouth communications or other salient stimuli randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth the survey evidence is interpreted as supporting such models

ergodic fluctuations in deterministic economic models abstract nonperiodic business fluctuations are shown to exist with positive measure generically and to behave like stationary stochastic processes in the standard dynamic macro model the implication is that so called chaotic fluctuations are probable for random initial conditions in a large class of recursive economies

market reforms and commodity price volatility the case of east african coffee market the goal of this paper is to examine the impact of commodity market reforms on producer price volatility using evidence from the east african coffee market the results based on time varying volatility models and key summary statistics show that coffee market reforms in the east african community eac are associated with changes in producer price volatility and volatility persistence at both country and regional levels however reforms were not the only cause of changes in price volatility the study further shows that reforms had different effects on prices volatilities of arabica and robusta varieties of coffee grown in individual eac countries these findings have wider implication for commodity market reforms and producer price stabilisation policies in the eac and coffee producing countries in sub sahara africa