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MULTIASSET MARKET DYNAMICS

Published online by Cambridge University Press:  01 November 2004

FRANK H. WESTERHOFF
FRANK H. WESTERHOFF
Affiliation:
University of Osnabrück
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Abstract

This paper explores multiasset market dynamics. We consider a limited number of markets on which two types of agents are active. Fundamentalists specialize in a certain market to gather expertise. Chartists may switch between markets since they use simple extrapolative methods. Specifically, chartists prefer markets that display price trends but that are not too misaligned. The interaction between the traders causes complex dynamics. Even in the absence of random shocks, our artificial markets mimic the behavior of actual asset markets closely. Our model also offers reasons for the high degree of comovements in stock prices observed empirically.

Keywords

Heterogeneous AgentsTechnical and Fundamental AnalysisAsset Price DynamicsComovements in Stock Prices
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 8 , Issue 5 , November 2004 , pp. 596 - 616
Copyright
© 2004 Cambridge University Press

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