The bull and bear market model of Huang and Day: Some extensions and new results |
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Authors: | Fabio Tramontana Frank Westerhoff Laura Gardini |
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Affiliation: | 1. Department of Economics and Management, University of Pavia, Via S.Felice 5, 27100 Pavia, Italy;2. Department of Economics, University of Bamberg, Feldkirchenstrasse 21, 96045 Bamberg, Germany;3. Department of Economics, Society, Politics, University of Urbino, Via Saffi 42, 61029 Urbino, Italy |
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Abstract: | We develop a financial market model with interacting chartists and fundamentalists that embeds the famous bull and bear market model of Huang and Day as a special case. Their model is given by a one-dimensional continuous piecewise-linear map. Our model, on the other hand, is more flexible and is represented by a one-dimensional discontinuous piecewise-linear map. Nevertheless, we are able to provide a more or less complete analytical treatment of the model dynamics by characterizing its possible outcomes in parameter space. In addition, we show that quite different scenarios can trigger real-world phenomena such as bull and bear market dynamics and excess volatility. |
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Keywords: | C02 D84 G12 G14 |
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