Summary
We present a simple agent based model aimed at the qualitative description of trading activity in a “stylized” financial market. A two assets economy is considered, with a bond providing a riskless constant return and a risky stock, paying constant dividends, whose price is fixed via Walrasian auction. The market participants are speculators described as myopic utility maximizers provided with limited forecasting ability. If one varies the parameters describing the market and the agents behavior, the model presents many distinct “phases”. In particular, the no-arbitrage “fundamental” price can emerge as a stable fixed point, while for different parameterizations the market shows chaotic dynamics with speculative bubbles and crashes.
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Bottazzi, G. (2004). A Simple Micro-Model of Market Dynamics. In: Gallegati, M., Kirman, A.P., Marsili, M. (eds) The Complex Dynamics of Economic Interaction. Lecture Notes in Economics and Mathematical Systems, vol 531. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17045-4_12
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DOI: https://doi.org/10.1007/978-3-642-17045-4_12
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