Dynamical analysis of a financial market with fundamentalists, chartists, and imitators
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Abstract
The aim of the paper is to understand the price dynamics generated by the interaction of traders relying \non heterogeneous expectations in an asset pricing model. In the present work we propose a financial \nmarket populated by three types of agents – fundamentalists, chartists and imitators. The latter submit \nbuying/selling orders according to different trading rules using a 2D Piecewise Linear (PWL) discontinuous map. Our contribution to the existing financial literature is twofold. First, we perform an analytical \nstudy of the model involving a 2D PWL discontinuous map, where mainly numerical results are provided \nby researchers, besides few exceptions. In particular, we investigate the bifurcations showed by the model \nand the large variety of dynamical behavior produced. Finally, we provide numerical simulations in order \nto highlight the interaction between traders with heterogeneous expectations that can lead to intricate \nbull and bear price dynamics.