Dynamic Effects of Increasing Heterogeneity in Financial Markets

Developing a model in which heterogeneity arises among two groups of fundamentalists that follow gurus, we focus on the dynamic effects of increasing heterogeneity. We show that an increasing degree of heterogeneity leads firstly (i) to insurgence of a pitchfork bifurcation and, secondly (ii) generates, together with a larger reaction to misalignment of both market makers and agents, the appearance of a periodic, or even, chaotic, price fluctuation (trough an homoclinic bifurcation, [1]).