Resource title

Bifurcation routes to volatility clustering

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Resource description

A simple asset pricing model with two types of adaptively learning traders, fundamentalists and technical analysts, is studied. Fractions of these trader types, which are both boundedly rational, change over time according to evolutionary learning, with technical analysts conditioning their forecasting rule upon deviations from a benchmark fundamental. Volatility clustering arises endogenously in this model. Two mechanisms are proposed as an explanation. The first is coexistence of a stable steady state and a stable limit cycle, which arise as a consequence of a so-called Chenciner bifurcation of the system. The second is intermittency and associated bifurcation routes to strange attractors. Both phenomena are persistent and occur generically in nonlinear multi-agent evolutionary systems. (author's abstract) ; Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

Resource author

Andrea Gaunersdorfer, Cars H. Hommes, Florian O. O. Wagener

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Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/522/1/document.pdf

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Adapt according to the license agreement. Always reference the original source and author.