IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v49y2002i2p173-197.html
   My bibliography  Save this article

Speculative behaviour and complex asset price dynamics: a global analysis

Author

Listed:
  • Chiarella, Carl
  • Dieci, Roberto
  • Gardini, Laura

Abstract

This paper analyses the dynamics of a model of a share market consisting of two groups of traders: fundamentalists, who form rational expectations on 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 dynamic behaviour is analysed in detail, particularly with respect to global dynamical behaviour. 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 noninvertibility of the map. The method of critical curves of noninvertible 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 stochastic versions of the model.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chiarella, Carl & Dieci, Roberto & Gardini, Laura, 2002. "Speculative behaviour and complex asset price dynamics: a global analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 49(2), pages 173-197, October.
    • Handle: RePEc:eee:jeborg:v:49:y:2002:i:2:p:173-197
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-2681(02)00066-5
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. C. Chiarella & X-Z. He, 2001. "Asset price and wealth dynamics under heterogeneous expectations," Quantitative Finance, Taylor & Francis Journals, vol. 1(5), pages 509-526.
    2. Chiarella, Carl & He, Xue-Zhong, 2002. "Heterogeneous Beliefs, Risk and Learning in a Simple Asset Pricing Model," Computational Economics, Springer;Society for Computational Economics, vol. 19(1), pages 95-132, February.
    3. Goldman, M Barry & Beja, Avraham, 1979. "Market Prices vs. Equilibrium Prices: Returns' Variance, Serial Correlation, and the Role of the Specialist," Journal of Finance, American Finance Association, vol. 34(3), pages 595-607, June.
    4. Beja, Avraham & Goldman, M Barry, 1980. "On the Dynamic Behavior of Prices in Disequilibrium," Journal of Finance, American Finance Association, vol. 35(2), pages 235-248, May.
    5. Carl Chiarella & Roberto Dieci & Laura Gardini, 2003. "A Dynamic Analysis of Speculation Across Two Markets," Research Paper Series 89, Quantitative Finance Research Centre, University of Technology, Sydney.
    6. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
    7. Day, Richard H. & Huang, Weihong, 1990. "Bulls, bears and market sheep," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 299-329, December.
    8. Lux, Thomas, 1998. "The socio-economic dynamics of speculative markets: interacting agents, chaos, and the fat tails of return distributions," Journal of Economic Behavior & Organization, Elsevier, vol. 33(2), pages 143-165, January.
    9. Carl Chiarella, 1992. "The Dynamics of Speculative Behaviour," Working Paper Series 13, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    10. Zeeman, E. C., 1974. "On the unstable behaviour of stock exchanges," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 39-49, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carl Chiarella & Roberto Dieci & Laura Gardini, 2003. "A Dynamic Analysis of Speculation Across Two Markets," Research Paper Series 89, Quantitative Finance Research Centre, University of Technology, Sydney.
    2. Chiarella, Carl & Dieci, Roberto & Gardini, Laura, 2006. "Asset price and wealth dynamics in a financial market with heterogeneous agents," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1755-1786.
    3. Hommes, C.H., 2005. "Heterogeneous Agent Models in Economics and Finance, In: Handbook of Computational Economics II: Agent-Based Computational Economics, edited by Leigh Tesfatsion and Ken Judd , Elsevier, Amsterdam 2006," CeNDEF Working Papers 05-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    4. Carl Chiarella & Roberto Dieci & Xue-Zhong He, 2011. "The dynamic behaviour of asset prices in disequilibrium: a survey," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 2(2), pages 101-139.
    5. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186, Elsevier.
    6. Lux, Thomas, 2008. "Stochastic behavioral asset pricing models and the stylized facts," Economics Working Papers 2008-08, Christian-Albrechts-University of Kiel, Department of Economics.
    7. Majewski, Adam A. & Ciliberti, Stefano & Bouchaud, Jean-Philippe, 2020. "Co-existence of trend and value in financial markets: Estimating an extended Chiarella model," Journal of Economic Dynamics and Control, Elsevier, vol. 112(C).
    8. Xue-Zhong He, 2003. "Asset Pricing, Volatility and Market Behaviour: A Market Fraction Approach," Research Paper Series 95, Quantitative Finance Research Centre, University of Technology, Sydney.
    9. Carl Chiarella & Roberto Dieci & Xue-Zhong He, 2008. "Heterogeneity, Market Mechanisms, and Asset Price Dynamics," Research Paper Series 231, Quantitative Finance Research Centre, University of Technology, Sydney.
    10. Carl Chiarella & Roberto Dieci & Laura Gardini, 2005. "The Dynamic Interaction of Speculation and Diversification," Applied Mathematical Finance, Taylor & Francis Journals, vol. 12(1), pages 17-52.
    11. Lux, Thomas, 2008. "Stochastic behavioral asset pricing models and the stylized facts," Kiel Working Papers 1426, Kiel Institute for the World Economy (IfW Kiel).
    12. Detlef Seese & Christof Weinhardt & Frank Schlottmann (ed.), 2008. "Handbook on Information Technology in Finance," International Handbooks on Information Systems, Springer, number 978-3-540-49487-4, November.
    13. Sandrine Jacob Leal, 2013. "Momentum effect in individual stocks and heterogeneous beliefs among fundamentalists," Economics Bulletin, AccessEcon, vol. 33(4), pages 3102-3116.
    14. Youwei Li & Xue-Zhong He, 2005. "Long Memory, Heterogeneity, and Trend Chasing," Computing in Economics and Finance 2005 113, Society for Computational Economics.
    15. Yeh, Chia-Hsuan & Yang, Chun-Yi, 2010. "Examining the effectiveness of price limits in an artificial stock market," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 2089-2108, October.
    16. J.-H. Steffi Yang & Satchell, S.E., 2002. "The Impact of Technical Analysis on Asset Price Dynamics," Cambridge Working Papers in Economics 0219, Faculty of Economics, University of Cambridge.
    17. Sansone, Alessandro & Garofalo, Giuseppe, 2007. "Asset price dynamics in a financial market with heterogeneous trading strategies and time delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 247-257.
    18. He, Xue-Zhong & Li, Kai, 2012. "Heterogeneous beliefs and adaptive behaviour in a continuous-time asset price model," Journal of Economic Dynamics and Control, Elsevier, vol. 36(7), pages 973-987.
    19. Chiarella Carl & Di Guilmi Corrado, 2015. "The limit distribution of evolving strategies in financial markets," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(2), pages 137-159, April.
    20. Min Zheng & Duo Wang & Xue-Zhong He, 2009. "Asymmetry of technical analysis and market price volatility," Published Paper Series 2009-6, Finance Discipline Group, UTS Business School, University of Technology, Sydney.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:49:y:2002:i:2:p:173-197. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.