Empirical evidence has suggested that, facing different trading strategies and complicated decision, the proportions of agents relying on particular strategies may stay at constant level or vary over time. This paper presents a simple "dynamic market fraction" model of two groups of traders, fundamentalists and trend followers, under a market maker scenario. Market mood and evolutionary adaption are characterized by fixed and adaptive switching fraction among two groups, respectively. Using local stability and bifurcation analysis, as well as numerical simulation, the role played by the key parameters in the market behaviour is examined. Particular attention is paid to the impact of the market fraction, determined by the fixed proportions of confident fundamentalists and trend followers, and by the proportion of adaptively rational agents, who adopt different strategies over time depending on realized profits. © 2005 Elsevier Ltd. All rights reserved.

Dieci, R., Foroni, I., Gardini, L., & He, X. (2006). Market Mood, Adaptive Beliefs and Asset Price Dynamics. CHAOS, SOLITONS AND FRACTALS, 29(3), 520-534 [10.1016/j.chaos.2005.08.065].

Market Mood, Adaptive Beliefs and Asset Price Dynamics

FORONI, ILARIA;
2006

Abstract

Empirical evidence has suggested that, facing different trading strategies and complicated decision, the proportions of agents relying on particular strategies may stay at constant level or vary over time. This paper presents a simple "dynamic market fraction" model of two groups of traders, fundamentalists and trend followers, under a market maker scenario. Market mood and evolutionary adaption are characterized by fixed and adaptive switching fraction among two groups, respectively. Using local stability and bifurcation analysis, as well as numerical simulation, the role played by the key parameters in the market behaviour is examined. Particular attention is paid to the impact of the market fraction, determined by the fixed proportions of confident fundamentalists and trend followers, and by the proportion of adaptively rational agents, who adopt different strategies over time depending on realized profits. © 2005 Elsevier Ltd. All rights reserved.
Articolo in rivista - Articolo scientifico
Discrete dynamical systems, Asset price dynamics
English
520
534
Dieci, R., Foroni, I., Gardini, L., & He, X. (2006). Market Mood, Adaptive Beliefs and Asset Price Dynamics. CHAOS, SOLITONS AND FRACTALS, 29(3), 520-534 [10.1016/j.chaos.2005.08.065].
Dieci, R; Foroni, I; Gardini, L; He, X
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/3629
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