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A simple financial market model with chartists and fundamentalists: Market entry levels and discontinuities

Mathematics and Computers in Simulation, ISSN: 0378-4754, Vol: 108, Page: 16-40
2015
  • 21
    Citations
  • 0
    Usage
  • 35
    Captures
  • 0
    Mentions
  • 2
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    21
    • Citation Indexes
      21
  • Captures
    35
  • Social Media
    2
    • Shares, Likes & Comments
      2
      • Facebook
        2

Article Description

We present a simple financial market model with interacting chartists and fundamentalists. Since some speculators only become active when a certain misalignment level has been crossed, the model dynamics is driven by a discontinuous piecewise linear map. Recent mathematical techniques allow a comprehensive study of the model's dynamical system. One of its surprising features is that model simulations may appear to be chaotic, although only regular dynamics can emerge. While our deterministic model is able to produce stylized bubbles and crashes we also show that a stochastic version of our model is able to match the finer details of financial market dynamics.

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