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Bifurcation Routes to Volatility Clustering under Evolutionary Learning


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


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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.
Klassifikation Volkswirtschaftstheorie; Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Freie Schlagwörter Multi-agent systems; Bounded rationality; Evolutionary learning; Bifurcations and chaos; Coexisting attractors
Sprache Dokument Englisch
Publikationsjahr 2008
Seitenangabe S. 27-47
Zeitschriftentitel Journal of Economic Behavior & Organization, 67 (2008) 1
DOI http://dx.doi.org/10.1016/j.jebo.2007.07.004
Status Postprint; begutachtet (peer reviewed)
Lizenz PEER Licence Agreement (applicable only to documents from PEER project)