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Contagion effects in a chartist–fundamentalist model with time delays

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  • Dibeh, Ghassan

Abstract

In this paper two models of speculative markets are developed to study the effects of feedback mechanisms in financial markets. In the first model, a crash market model couples a linear chartist–fundamentalist model with time delays with a log-periodic market index I(t) through direct coupling. Numerical solutions to the model show that asset prices exhibit significant persistence as a result of the coupling to the log-periodic market index. An extension to include endogenous wealth dynamics shows that the chartists benefit from the persistent dynamics induced by the coupling. The second model is a two-asset model represented by a 2-dimensional delay-differential equation. Asset one price exhibits limit cycle dynamics while in the second market asset prices follow stable damped oscillations. The markets are coupled through a diffusive coupling term. Solutions to the coupled model show that the dynamics of asset two changes fundamentally with the price now exhibiting a limit cycle. The stable converging dynamics is replaced with limit cycle oscillations around the fundamental.

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  • Dibeh, Ghassan, 2007. "Contagion effects in a chartist–fundamentalist model with time delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 52-57.
    • Handle: RePEc:eee:phsmap:v:382:y:2007:i:1:p:52-57
    DOI: 10.1016/j.physa.2007.02.007
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    References listed on IDEAS

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    1. 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.
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    3. Dibeh, Ghassan, 2005. "Speculative dynamics in a time-delay model of asset prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 199-208.
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    Cited by:

    1. Ghassan Dibeh & Haidar Harmanani, 2012. "A Stochastic Chartist–Fundamentalist Model with Time Delays," Computational Economics, Springer;Society for Computational Economics, vol. 40(2), pages 105-113, August.
    2. Luca Guerrini & Akio Matsumoto & Ferenc Szidarovszky, 2018. "A heterogeneous agent model of asset price dynamics with two time delays," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(2), pages 379-397, November.
    3. Wang, Luxuan & Niu, Ben & Wei, Junjie, 2016. "Dynamical analysis for a model of asset prices with two delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 447(C), pages 297-313.
    4. Ghassan Dibeh & Omar El Deeb, 2024. "Synchronization in a market model with time delays," Papers 2405.00046, arXiv.org.
    5. Miquel Montero, 2021. "Predator–prey model for stock market fluctuations," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(1), pages 29-57, January.
    6. Loretti I. Dobrescu & Mihaela Neamtu & Gabriela Mircea, 2016. "Asset Price Dynamics in a Chartist-Fundamentalist Model with Time Delays: A Bifurcation Analysis," Discrete Dynamics in Nature and Society, Hindawi, vol. 2016, pages 1-15, February.

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