Asset price dynamics and diversification with heterogeneous agents

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dc.contributor.author Chiarella, Carl en_US
dc.contributor.author Dieci, Roberto en_US
dc.contributor.author Gardini, Laura en_US
dc.contributor.editor Lux, T; Reitz S; Samanidou E en_US
dc.date.accessioned 2010-06-18T02:06:50Z
dc.date.available 2010-06-18T02:06:50Z
dc.date.issued 2005 en_US
dc.identifier 2005002021 en_US
dc.identifier.citation Chiarella Carl, Dieci Roberto, and Gardini Laura 2005, 'Asset price dynamics and diversification with heterogeneous agents', in http://dx.doi.org/10.1007/3-540-27296-8_17 (ed.), Springer-Verlag, Berlin, Germany, pp. 251-267. en_US
dc.identifier.issn 3-540-22237-5 en_US
dc.identifier.other B1 en_US
dc.identifier.uri http://hdl.handle.net/10453/12378
dc.description.abstract A discrete-time dynamic model of a financial market is developed, where two types of agents, fundamentalists and chartists, allocate their wealth between two risky assets and a safe asset, according to one-period mean-variance maximization. The two groups of agents form different expectations about asset returns and their variance/covariance structure, and this results in different demand functions. At the end of each trading period, agents' demands are aggregated by a market maker, who sets the next period prices as functions of the excess demand. The model results in a high-dimensional nonlinear discrete-time dynamical system, which describes the time evolution of prices and agents' beliefs about expected returns, variances and correlation. It is shown that the unique steady state may become unstable through a Hopf-bifurcation and that an attracting limit cycle, or more complex attractors, exist for particular ranges of the key parameters. In particular, the two risky assets may exhibit ?coupled? long-run price fluctuations and time-varying correlation of returns. en_US
dc.language en_US
dc.publisher Springer en_US
dc.relation.hasversion Accepted manuscript version en_US
dc.relation.isbasedon http://dx.doi.org/10.1007/3-540-27296-8_17 en_US
dc.rights The original publication is available at www.springerlink.com en_US
dc.title Asset price dynamics and diversification with heterogeneous agents en_US
dc.parent Nonlinear Dynamics and Heterogeneous Interacting Agents en_US
dc.journal.volume en_US
dc.journal.number en_US
dc.publocation Berlin, Germany en_US
dc.identifier.startpage 251 en_US
dc.identifier.endpage 267 en_US
dc.cauo.name BUS.School of Finance and Economics en_US
dc.conference Verified OK en_US
dc.for 140100 en_US
dc.personcode 716350 en_US
dc.personcode 0000017793 en_US
dc.personcode 0000017794 en_US
dc.percentage 60 en_US
dc.classification.name Economic Theory en_US
dc.classification.type FOR-08 en_US
dc.edition 1 en_US
dc.custom en_US
dc.date.activity en_US
dc.location.activity en_US
dc.description.keywords bounded rationality; heterogeneous beliefs; asset price dynamics; nonlinear dynamical systems en_US


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