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Chaos, Solitons & Fractals
Volume 11, Issue 13, October 2000, Pages 2103-2121
 
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doi:10.1016/S0960-0779(99)00109-5    How to Cite or Link Using DOI (Opens New Window)
Copyright © 2000 Elsevier Science Ltd. All rights reserved.

Nonlinear effects in a discrete-time dynamic model of a stock market

Gian Italo BischiCorresponding Author Contact Information, E-mail The Corresponding Author, a and Vincenzo ValoriE-mail The Corresponding Author, b

a Istituto di Scienze Economiche, University of Urbino, 61029, Urbino, Italy b DIMAD, University of Firenze, 50134, Firenze, Italy

Accepted 1 July 1999;
Communicated by Tönu Puu.
Available online 23 June 2000.

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Abstract

The time evolution of prices and savings in a stock market is modeled by a discrete time nonlinear dynamical system. The model proposed has a unique and unstable steady-state, so that the time evolution is determined by the nonlinear effects acting out of the equilibrium. The nonlinearities strongly influence the kind of long-run dynamics of the system. In particular, the global geometric properties of the noninvertible map of the plane, whose iteration gives the evolution of the system, are important to understand the global bifurcations which change the qualitative properties of the asymptotic dynamics. Such global bifurcations are studied by geometric and numerical methods based on the theory of critical curves, a powerful tool for the characterization of the global dynamical properties of noninvertible mappings of the plane. The model unfolds more complex chaotic and unpredictable trajectories as a consequence of increasing agents' “speculative” or “capital gain realizing” attitudes. The global analysis indicates that, for some ranges of the parameter values, the system has several coexisting attractors, and it may not be robust with respect to exogenous shocks due to the complexity of the basins of attraction.

Article Outline

1. Introduction
2. The model
3. Local bifurcations in the enlarged parameter space
4. Global properties and routes to complexity
4.1. Preimages and critical curves
4.2. From attracting closed invariant curves to chaotic attractors
4.3. Basins and their bifurcations
5. Conclusions
Acknowledgements
References













Chaos, Solitons & Fractals
Volume 11, Issue 13, October 2000, Pages 2103-2121
 
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