Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/191896 
Year of Publication: 
2019
Series/Report no.: 
Economics Discussion Papers No. 2019-3
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
The authors analyze financial interactions between fundamentalists and chartists within a heterogeneous agent model, focusing on the role of fundamentalists stabilizing prices. In contrast to related studies, which are based on simulations and calculations, they analytically prove that the presence of fundamentalists is not sufficient to avoid asset price bubbles. The behavior of trend followers with bounded leverage can result in exploding prices irrespective of fundamentalists' investment decisions. They derive upper boundaries for positive feedback traders' initial investment necessary to avoid exploding prices. In order to stabilize stock/asset markets, intervention measures might be helpful.
Subjects: 
heterogeneous agents
feedback trading
fundamentalists
chartists
trend followers
financial bubbles
financial crisis
JEL: 
D84
G01
G11
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

Files in This Item:
File
Size
477.22 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.