Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95336
Authors: 
Tramontana, Fabio
Westerhoff, Frank
Gardini, Laura
Year of Publication: 
2011
Series/Report no.: 
Quaderni di Dipartimento 150
Abstract: 
We present a simple financial market model with interacting chartists and fundamentalists. Since some of these speculators only become active when a certain misalignment level has been crossed, the dynamics are driven by a discontinuous piecewise linear map. The model endogenously generates bubbles and crashes and excess volatility for a broad range of parameter values - and thus explains some key phenomena of financial markets. Moreover, we provide a complete analytical study of the model's dynamical system. One of its surprising features is that model simulations may appear to be chaotic, although only regular dynamics can emerge.
Subjects: 
financial market crisis
bull and bear market dynamics
discontinuous piecewise linear maps
border-collision bifurcations
period adding scheme
Document Type: 
Working Paper

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