Abstract

In a heterogenous agents framework, we study a randomized version of Zeeman's market model with fundamental and momentum traders. Using methods from random dynamical systems theory, we examine convergence properties of invariant measures which correspond to market equilibria. It turns out that due to a stochastic stabilisation effect the market stays stable up to some critical value of speculative activity. If this threshold is surpassed, sudden trend reversals are possible without being induced by some exogenous shock.

Recommended Citation

Thorsten Rheinlaender and Marcus Steinkamp (2004) "A Stochastic Version of Zeeman's Market Model", Studies in Nonlinear Dynamics & Econometrics: Vol. 8: No. 4, Article 4.
http://www.bepress.com/snde/vol8/iss4/art4