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Bifurcation Routes to Volatility Clustering under Evolutionary Learning

[journal article]

Gaunersdorfer, Andrea; Hommes, Cars H.; Wagener, Florian O.O.

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-253898

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Abstract A simple asset pricing model with two types of boundedly rational traders, fundamentalists and chartists, is studied. Fractions of trader types change over time according to evolutionary learning, with chartists conditioning their forecasting rule upon deviations from a benchmark fundamental. Volatility clustering arises endogenously and two generic mechanisms are proposed as an explanation: (1) coexistence of a stable steady state and a stable limit cycle, due to a so-called Chenciner bifurcation of the system and (2) intermittency and associated bifurcation routes to strange attractors. Economic intuition as to why these phenomena arise in nonlinear multi-agent evolutionary systems is provided.
Classification National Economy; Economic Statistics, Econometrics, Business Informatics
Free Keywords Multi-agent systems; Bounded rationality; Evolutionary learning; Bifurcations and chaos; Coexisting attractors
Document language English
Publication Year 2008
Page/Pages p. 27-47
Journal Journal of Economic Behavior & Organization, 67 (2008) 1
DOI http://dx.doi.org/10.1016/j.jebo.2007.07.004
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)