1,721,128 research outputs found
Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear dynamics approach
Full text linkWe combine a standard stock-flow housing market model, incorporating explicit relationships between house prices, the housing stock, and the rent level, with a parsimonious expectation formation scheme of housing market investors, reflecting an evolving mix of extrapolative and regressive expectation rules. The model results in a two-dimensional discrete-time nonlinear dynamical system. Based on realistic parameters, the model is able to generate endogenous boom-bust housing market dynamics with lasting periods of overvaluation and overbuilding. We thus exploit our model to investigate how real forces, in particular supply conditions, interact with expectations-driven housing market fluctuations
NONLINEAR ECONOMIC DYNAMICS AND FINANCIAL MODELLING - Essays in Honour of Carl Chiarella
No full textThis book reflects the state of the art on nonlinear economic dynamics, financial market modelling and quantitative finance. It contains eighteen papers with topics ranging from disequilibrium macroeconomics, monetary dynamics, monopoly, financial market and limit order market models with boundedly rational heterogeneous agents to estimation, time series modelling and empirical analysis, and from risk management of interest-rate products, futures price volatility and American option pricing with stochastic volatility to evaluation of risk and derivatives of electricity market. The book illustrates some of the most recent research tools in these areas and will be of interest to economists working in economic dynamics and financial market modelling, to mathematicians who are interested in applying complexity theory to economics and finance, and to market practitioners and researchers in quantitative finance interested in limit order, futures and electricity market modelling, derivative pricing and risk management
Steady states, stability and bifurcations in multi-asset market models
Full text linkWe provide a full analytical treatment of a multi-asset market model in which speculators have the choice between two risky and one safe asset. As it turns out, the dynamics of our model is driven by a four-dimensional nonlinear map and may undergo a transcritical, flip or Neimark-Sacker bifurcation. While the first bifurcation is associated with an undervaluation of the risky assets, the latter two may trigger (complex) endogenous dynamics. To facilitate our analysis, we first study a simpler two-dimensional setup of our model in which speculators can only switch between one risky and one safe asset
Interactions between stock, bond and housing markets
Full text linkWe develop a model in which investors can participate in stock, bond and housing markets. Investors' market entry decisions are subject to herding effects and depend on the markets' price trends and on their mispricings. The dynamics of our model is governed by a four-dimensional nonlinear map and its unique inner steady state is characterized by standard present-value relations between dividends, rents and the bond rate. Amongst other things, we show that endogenous stock and housing market dynamics emerge, countercyclical to each other, if investors react strongly to the markets' price trends. Such a cross feedback reflects investors' tendency to transfer their enthusiasm from one speculative market to another
Global bifurcations in a three dimensional financial model of “bull and bear” interactions
No full textThe Dynamic Interaction of Speculation and Diversification
No full textA discrete time model of a financial market is developed, in which heterogeneous interacting groups of agents allocate their wealth between two risky assets and a riskless asset. In each period each group formulates its demand for the risky assets and the risk-free asset according to myopic mean-variance maximizazion. The market consists of two types of agents: fundamentalists, who hold an estimate of the fundamental values of the risky assets and whose demand for each asset is a function of the deviation of the current price from the fundamental, and chartists, a group basing their trading decisions on an analysis of past returns. The time evolution of the prices is modelled by assuming the existence of a market maker, who sets excess demand of each asset to zero at the end of each trading period by taking an offsetting long or short position, and who announces the next period prices as functions of the excess demand for each asset and with a view to long-run market stability. The model is reduced to a seven-dimensional nonlinear discrete-time dynamical system, that describes the time evolution of prices and agents' beliefs about expected returns, variances and correlation. The unique steady state of the model is determined and the local asymptotic stability of the equilibrium is analysed, as a function of the key parameters that characterize agents' behaviour. In particular it is shown that when chartists update their expectations sufficiently fast, then the stability of the equilibrium is lost through a supercritical Neimark-Hopf bifurcation, and self-sustained price fluctuations along an attracting limit cycle appear in one or both markets. Global analysis is also performed, by using numerical techniques, in order to understand the role played by the chartists' behaviour in the transition to a regime characterized by irregular oscillatory motion and coexistence of attractors. It is also shown how changes occurring in one market may affect the price dynamics of the alternative risky asset, as a consequence of the dynamic updating of agents' portfolios.
Heterogeneous Agent Models in Finance
No full textThis chapter surveys the state-of-art of heterogeneous agent models (HAMs) in finance using a jointly theoretical and empirical analysis, combined with numerical analysis from the latest development in computational finance. It provides supporting evidence on the explanatory power of HAMs to various stylized facts and market anomalies through model calibration, estimation, and economic mechanisms analysis. It presents HAMs within the mainstream finance and provides a unified framework in continuous time to study the impact of historical price information on price dynamics, profitability and optimality of fundamental and momentum trading. It demonstrates how HAMs can help to understand stock price co-movements and evolutionary CAPM. It also introduces a new HAMs perspective on house price dynamics and an integrated approach to study dynamics of limit order markets. The survey provides further insights into the complexity and efficiency of financial markets and policy implications
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
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