A dynamical systems model of price bubbles and cycles
| Autor: | Anton J. Kleywegt, Vinod Cheriyan |
|---|---|
| Rok vydání: | 2016 |
| Předmět: |
Rational expectations
Dynamical systems theory 05 social sciences Dynamical system Behavioral economics Bounded rationality Microeconomics 0502 economics and business Attractor Market price Economics Asset (economics) 050207 economics General Economics Econometrics and Finance Finance 050205 econometrics |
| Zdroj: | Quantitative Finance. 16:309-336 |
| ISSN: | 1469-7696 1469-7688 |
| DOI: | 10.1080/14697688.2015.1119009 |
| Popis: | Various markets exhibit growth and collapse in prices that are sometimes called bubbles, and cycles if the phenomenon repeats. Rational expectations models have been proposed to explain these phenomena; however, such models suffer from a number of criticisms, including lack of experimental support. Moreover, they assume unbiased forecasts without explaining how the investors form their forecasts. In this paper, we provide a model of asset price forecasts and market prices that can be calibrated with experimental data and that can capture various behavioural characteristics of investors such as confidence and panic. We study the resulting dynamical system and show that asset price bubbles may result from seemingly reasonable forecasts and decisions of investors. The model attempts to provide insight into the qualitative connection between investors’ forecasting behaviour and the formation of bubbles and cycles. We present results on the convergence of the process to a fixed point, or to an attractor that d... |
| Databáze: | OpenAIRE |
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