Speculative behavior and asset price dynamics.
This paper deals with speculative trading. Guided by empirical observations, a nonlinear deterministic asset pricing model is developed in which traders repeatedly choose between technical and fundamental analysis to determine their orders. The interaction between the trading rules produces complex dynamics. The model endogenously replicates the stylized facts of excess volatility, high trading volumes, shifts in the level of asset prices, and volatility clustering.
Westerhoff
Frank
F
Department of Economics, University of Osnabrueck, Osnabrueck, Germany. fwesterho@oec.uni-osnabrueck.de
D003132:Commerce; D003657:Decision Making; D006801:Humans; D018803:Models, Economic; D017711:Nonlinear Dynamics