Complexity with Heterogeneous Fundamentalists and a Multiplicative Price Mechanism. (3rd August 2014)

• Record Type: Journal Article
• Authors: Naimzada, Ahmad K.; Ricchiuti, Giorgio
• Is Part Of: Economic notes. Volume 43:Number 3(2014:Nov.)
• Page Start: 233
• Page End: 247
• Publication Date: 2014-08-03
• Subjects: Economics -- Periodicals; 330.9
• DOI: 10.1111/ecno.12021
• Languages: English
• ISSNs: 0391-5026

Abstract

<abstract abstract-type="main" xml:lang="en"> <title>Abstract</title> <sec id="ecno12021-sec-0001" sec-type="section"> <p>In contrast with the canonical models of financial markets with heterogeneous agents, , Naimzada and Ricchiuti, (<xref ref-type="link" rid="ecno12021-bib-0010">2008</xref>, <xref ref-type="link" rid="ecno12021-bib-0011">2009</xref>) show that the interaction of groups of agents who have the same trading rule but present different beliefs about the fundamental value could be a source of instability. In this paper, differently from, Naimzada and Ricchiuti, (<xref ref-type="link" rid="ecno12021-bib-0010">2008</xref>, <xref ref-type="link" rid="ecno12021-bib-0011">2009</xref>), we assume that the market maker employs a so‐called multiplicative price mechanism (Tuinstra, <xref ref-type="link" rid="ecno12021-bib-0014">2002</xref>; Zhu <italic>et al</italic>., <xref ref-type="link" rid="ecno12021-bib-0017">2009</xref>). We show that the occurrence of heterogeneity has an ambiguous role: it may either stabilize or destabilize the market.</p> </sec> </abstract>