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Bifurcation routes to volatility clustering

Gaunersdorfer, Andrea and Hommes, Cars H. and Wagener, Florian O. O. (2000) Bifurcation routes to volatility clustering. Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science", 73. SFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business, Vienna.

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Abstract

A simple asset pricing model with two types of adaptively learning traders, fundamentalists and technical analysts, is studied. Fractions of these trader types, which are both boundedly rational, change over time according to evolutionary learning, with technical analysts conditioning their forecasting rule upon deviations from a benchmark fundamental. Volatility clustering arises endogenously in this model. Two mechanisms are proposed as an explanation. The first is coexistence of a stable steady state and a stable limit cycle, which arise as a consequence of a so-called Chenciner bifurcation of the system. The second is intermittency and associated bifurcation routes to strange attractors. Both phenomena are persistent and occur generically in nonlinear multi-agent evolutionary systems. (author's abstract)

Item Type: Paper
Keywords: multi-agent systems / bounded rationality / evolutionary learning / bifurcation and chaos / coexisting attractors
Classification Codes: JEL E32, G12, D84
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Departments > Informationsverarbeitung u Prozessmanag. > Informationswirtschaft
Departments > Informationsverarbeitung u Prozessmanag. > Produktionsmanagement > Taudes
Departments > Marketing > Service Marketing und Tourismus
Depositing User: Repository Administrator
Date Deposited: 30 Jan 2002 15:08
Last Modified: 16 Jun 2011 12:22
URI: http://epub.wu.ac.at/id/eprint/522

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