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

the effectiveness of keynes tobin transaction taxes when heterogeneous agents can trade in different markets a behavioral finance approach abstract we develop a model in which boundedly rational agents apply technical and fundamental analysis to identify trading signals in two different speculative markets whether an agent trades and if so in which market with which strategy depends on profit considerations as it turns out an ongoing evolutionary competition between the trading strategies causes complex price dynamics which closely resembles the behavior of actual speculative prices moreover we find that if the agents have to pay a transaction tax in one market price variability decreases in this market but increases in the other market however the imposition of a uniform tax on all transactions stabilizes both markets our results suggest that if regulators of a market introduce a transaction tax other markets are likely to follow

money and financial markets introduction money and financial markets mark p taylor part 1 assessing the literature money demand analysis an outline keith cuthbertson david barlow financial market analysis an outline ronald macdonald and mark p taylor part 2 money demand studies money demand in five major countries estimating and interpreting error correction models james m boughton modelling broad and narrow money a study using cointegration martin brookes et al endogenous financial innovation and the demand for mo peter westaway and david walton money demand in high inflation countries a south american perpsective kate phylakis and mark p taylor the demand for money in four countries in the interwar period a study using monthly data jonathan slow et al part 3 money and financial markets some news on covered interest arbitrage mark p taylor patricia fraser monitoring bank risk a market based approach david miles stephen hall information interest rates and the volatility of asset prices laurence copeland richard c stapleton the decision to disclose research and development expenditure in the presence of a takeover threat jane black ian tonks persistence in stock market returns a disaggregated perspective roanld macdonald david power global capital market integration and the current account michael artis tamim bayoumi financial disorder and the theory of crisis e p davis part 4 new directions in financial market analysis neural networks and asset prices paul ormerod chartists fundamentalists and the transmission of opinion alan kirman

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

accounting for persistence and volatility of good level real exchange rates the role of sticky information abstract volatile and persistent real exchange rates are observed not only in aggregate series but also in micro price data at the retail level kehoe and midrigan 2007 recently showed that under a standard assumption on nominal price stickiness empirical frequencies of micro price adjustment cannot replicate the time series properties of the law of one price lop deviations we extend their sticky price model by combining good specific price adjustment with information stickiness in the sense of mankiw and reis 2002 our framework allows for multiple cities within a country using a panel of u s canadian city pairs we estimate a dynamic price adjustment process for 165 individual goods under a reasonable assumption on the money growth process we show that the model matches the persistence of the lop deviation for the median good and accounts for the majority of its volatility when information updates occur every 12 months

commodity markets price limiters and speculative price dynamics abstract we develop a behavioral commodity market model with consumers producers and heterogeneous speculators to characterize the nature of commodity price fluctuations and to explore the effectiveness of price stabilization schemes within our model we analyze how nonlinear interactions between market participants can create either bull or bear markets or irregular price fluctuations between bull and bear markets through a global homoclinic bifurcation both the imposition of a bottoming price level to support producers or a topping price level to protect consumers can eliminate such homoclinic bifurcations and hence reduce market price volatility however simple policy rules such as price limiters may have unexpected consequences in a complex environment a minimum price level decreases the average price while a maximum price limit increases the average price in addition price limiters influence the price dynamics in an intricate way and may cause volatility clustering

trading heterogeneity under information uncertainty abstract instead of heuristical heterogeneity assumption in the current heterogeneous agent models hams we derive the trading heterogeneity by introducing information uncertainty about the fundamental value to a ham conditional on their private information about the fundamental value agents choose different trading strategies when optimizing their expected utilities this provides a micro foundation to heterogeneity and switching behavior of agents we show that the ham with trading heterogeneity originating from the incomplete information performs equally well if not better than existing hams in generating bubbles crashes and mean reverting prices the simulated time series matches with the s p 500 in terms of power law distribution in returns volatility clustering and long memory in volatility

exchange rate expectations of chartists and fundamentalists this paper provides novel evidence on exchange rate expectations of both chartists and fundamentalists separately these groups indeed form expectations differently chartists change their expectations more often however all professionals expectations vary considerably as they generally follow strong exchange rate trends in line with non linear exchange rate modeling professionals expect mean reversion only if exchange rates deviate much from ppp chartists survive in fx markets as they forecast equally accurately as fundamentalists unexpected from an effcient market viewpoint chartists even outperform fundamentalists at short horizons overall these findings clearly support the chartist fundamentalist approach

speculative behaviour and complex asset price dynamics a global analysis this paper analyses the dynamics of a model of a share market consisting of two groups of traders fundamentalists who base their trading decisions on the expectation of a return to the fundamental value of the asset and chartists who base their trading decisions on an analysis of past price trends the model is reduced to a two dimensional map whose global dynamic behaviour is analysed in detail the dynamics are affected by parameters measuring the strength of fundamentalist demand and the speed with which chartists adjust their estimate of the trend to past price changes the parameter space is characterized according to the local stability instability of the equilibrium point as well as the non invertibility of the map the method of critical curves of non invertible maps is used to understand and describe the range of global bifurcations that can occur it is also shown how the knowledge of deterministic dynamics uncovered here can aid in understanding the behaviour of stochastic versions of the model

a robust rational route to randomness in a simple asset pricing model abstract we investigate asset pricing dynamics in an adaptive evolutionary asset pricing model with fundamentalists trend followers and a market maker agents can choose between a fundamentalist strategy at positive information cost or choose a trend following strategy for free price adjustment is proportional to the excess demand in the asset market agents asynchronously update their strategy according to realized net profits in the recent past as agents become more sensitive to differences in strategy performance the fundamental steady state becomes unstable and multiple steady states may arise as the traders sensitivity to differences in fitness increases a bifurcation route to chaos sets in due to homoclinic bifurcations of stable and unstable manifolds of the fundamental steady state

heterogeneous speculators endogenous fluctuations and interacting markets a model of stock prices and exchange rates abstract we develop a discrete time model in which the stock markets of two countries are linked via and with the foreign exchange market the foreign exchange market is characterized by nonlinear interactions between technical and fundamental traders such interactions may generate complex dynamics and recurrent switching between bull and bear market phases via a well known pitchfork and period doubling bifurcation path when technical traders become more aggressive the two stock markets are populated by fundamentalists and prices tend to evolve towards stable steady states driven by linear laws of motion a connection between such markets is established by allowing investors to trade abroad and the resulting three dimensional dynamical system is analyzed one goal of our paper is to explore potential spill over effects between foreign exchange and stock markets a second related goal is to study how the bifurcation sequence which characterizes the market with heterogeneous speculators is modified in the presence of interactions with other markets

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

heterogeneous expectations and speculative behavior in a dynamic multi asset framework abstract this paper develops a dynamic model of a financial market where heterogeneous agents invest among multiple risky assets and a risk free asset under a market maker scenario particular attention is paid to the case of two risky assets and two agent types fundamentalists and trend chasers whose beliefs on both first and second moments of the conditional distribution of returns are based on past observations conditions for the stability of the fundamental equilibrium are established and the effect of the correlation between the risky assets is examined it turns out that investors anticipated correlation and dynamic portfolio diversification do not always have a stabilizing role but rather may act as a source of complexity in the financial market

speculative behavior and the dynamics of interacting stock markets abstract we develop a simple agent based financial market model in which heterogeneous speculators apply technical and fundamental analysis to trade in two different stock markets speculators strategy market selections are repeated at each time step and depend on predisposition effects herding behavior and market circumstances simulations reveal that our model is able to explain a number of nontrivial statistical properties of and between international stock markets including bubbles and crashes fat tailed return distributions volatility clustering persistent trading volume coevolving stock prices and cross correlated volatilities against this background our model may be deemed to have been validated

exchange rate dynamics central bank interventions and chaos control methods abstract we use a simple chartist fundamentalist model developed by day and huang to explore recent chaos control algorithms as potential candidates for central bank intervention rules we find that methods such as delayed feedback control ogy and constant feedback have in principle the potential to reduce exchange rate variability and deviations from fundamentals even in the presence of large dynamic noise

macroeconomic and stock market interactions with endogenous aggregate sentiment dynamics abstract this paper studies the implications of heterogeneous capital gain expectations on output and asset prices we consider a disequilibrium macroeconomic model where agents expectations on future capital gains affect aggregate demand agents beliefs take two forms fundamentalist and chartist and the relative weight of the two types of agents is endogenously determined we show that there are two sources of instability arising from the interaction of the financial with the real part of the economy and from the heterogeneous opinion dynamics two main conclusions are derived on the one hand perhaps surprisingly the non linearity embedded in the opinion dynamics far from the steady state can play a stabilizing role by preventing the economy from moving towards an explosive path on the other hand however real financial interactions and sentiment dynamics do amplify exogenous shocks and tend to generate persistent fluctuations and the associated welfare losses we consider alternative policies to mitigate these effects

the price dynamics of common trading strategies a deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices this paper uses a market maker based method of price formation to study the price dynamics induced by several commonly used financial trading strategies showing how they amplify noise induce structure in prices and cause phenomena such as excess and clustered volatility

optimal monetary policy in a new keynesian model with animal spirits and financial markets this article presents a macro finance interaction model that integrates a nkm with bounded rationality and an agent based financial market model we derive four interactive channels between the two sectors where two channels are strictly microfounded we analyze the impact of the different channels on economic stability and derive optimal conventional and unconventional monetary policy rules we find that coefficients of optimal taylor rules do not significantly change if financial market stabilization becomes part of the central bank s objective function additionally we show that rule based backward looking monetary policy creates huge instabilities if expectations are boundedly rational our model is externally validated by showing that it generates fat tailed output growth rates

a prototype model of speculative dynamics with position based trading abstract the paper extracts a prototype asset pricing model from the literature where a market maker adjusts prices in response to order imbalances and the strategies of fundamentalists and chartists are position based that is the two groups are specified in terms of their desired holdings the deterministic formulation of the model leads to a neutral delay differential equation of the price whose mathematical analysis is non standard and may be of independent interest the stability conditions are nevertheless quite analogous to the order based beja goldman model the effects of parameter variations are also studied in a stochastic setting where special emphasis is put on the misalignment between price and the time varying fundamental value the market maker s risk aversion and the differential profits of fundamentalists and chartists

exchange rates change asset denominated currency difference and stock price fluctuation this paper examines differences in the connectedness between exchange rates and stock prices for companies with different asset currencies on the hong kong stock market and it seeks to explain tho

modeling regional linkage of financial markets abstract with the development of globalization and regional economic integration regional markets linked with a common currency emerge in which investors from domestic market are allowed to trade in foreign markets empirical studies have evidenced extensively the existence of co movement of asset prices or cross correlation in market returns among these markets especially in global event however there is no theoretical model in literature that can provide economically plausible justifications for these stylized facts this research intends to fill up such a gap with a simplest possible nonlinear dynamic model based on the classical market maker framework of day and huang 1990 a two market ham model is developed which does not only prove in theory the existence of price co movement but also replicate in simulation this typical characteristic along with other well known stylized facts characterizing individual financial market moreover theoretical analysis suggests meaningful implications for market opening policy in particular in terms of financial stability a relatively small market may not benefit from market linkage and market opening is essentially a double edged sword

staggered updating in an artificial financial market abstract we consider an environment in which traders search for trading opportunities and update their forecast rules at random intervals by ols the staggering of this updating process across traders allows differences in opinion to persist over time generating nontrivial price dynamics the nature of these dynamics is sensitive to the degree of overparameterization of forecast rules relative to market fundamentals