The bull and bear market model of Huang and Day: some extensions and new results

Auteurs

• Fabio Tramontana

Paramètres

• Affaires et économie
• BERG working paper series on government and growth

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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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• Année de publication: 2012