Market mood, adaptive beliefs and asset price dynamics

Dieci, R; Foroni, I; Gardini, L; He, XZ

Market mood, adaptive beliefs and asset price dynamics

Dieci, R Foroni, I Gardini, L He, XZ

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Publication Type:: Journal Article
Citation:: Chaos, Solitons and Fractals, 2006, 29 (3), pp. 520 - 534
Issue Date:: 2006-08-01

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Field	Value	Language
dc.contributor.author	Dieci, R	en_US
dc.contributor.author	Foroni, I	en_US
dc.contributor.author	Gardini, L	en_US
dc.contributor.author	He, XZ https://orcid.org/0000-0003-1446-9996	en_US
dc.date.issued	2006-08-01	en_US
dc.identifier.citation	Chaos, Solitons and Fractals, 2006, 29 (3), pp. 520 - 534	en_US
dc.identifier.issn	0960-0779	en_US
dc.identifier.uri	http://hdl.handle.net/10453/3440
dc.description.abstract	Empirical evidence has suggested that, facing different trading strategies and complicated decision, the proportions of agents relying on particular strategies may stay at constant level or vary over time. This paper presents a simple "dynamic market fraction" model of two groups of traders, fundamentalists and trend followers, under a market maker scenario. Market mood and evolutionary adaption are characterized by fixed and adaptive switching fraction among two groups, respectively. Using local stability and bifurcation analysis, as well as numerical simulation, the role played by the key parameters in the market behaviour is examined. Particular attention is paid to the impact of the market fraction, determined by the fixed proportions of confident fundamentalists and trend followers, and by the proportion of adaptively rational agents, who adopt different strategies over time depending on realized profits. © 2005 Elsevier Ltd. All rights reserved.	en_US
dc.relation	http://purl.org/au-research/grants/arc/DP0450526
dc.relation.ispartof	Chaos, Solitons and Fractals	en_US
dc.relation.isbasedon	10.1016/j.chaos.2005.08.065	en_US
dc.subject.classification	Mathematical Physics	en_US
dc.title	Market mood, adaptive beliefs and asset price dynamics	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	29	en_US
utslib.for	0103 Numerical and Computational Mathematics	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	01 Mathematical Sciences	en_US
utslib.for	08 Information and Computing Sciences	en_US
utslib.for	09 Engineering	en_US
dc.location.activity	Yeppoon, Australia
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	29	en_US

Abstract:

Empirical evidence has suggested that, facing different trading strategies and complicated decision, the proportions of agents relying on particular strategies may stay at constant level or vary over time. This paper presents a simple "dynamic market fraction" model of two groups of traders, fundamentalists and trend followers, under a market maker scenario. Market mood and evolutionary adaption are characterized by fixed and adaptive switching fraction among two groups, respectively. Using local stability and bifurcation analysis, as well as numerical simulation, the role played by the key parameters in the market behaviour is examined. Particular attention is paid to the impact of the market fraction, determined by the fixed proportions of confident fundamentalists and trend followers, and by the proportion of adaptively rational agents, who adopt different strategies over time depending on realized profits. © 2005 Elsevier Ltd. All rights reserved.

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http://hdl.handle.net/10453/3440