A Heterogeneous Agent Model of Asset Price with Three Time Delays

Akio Matsumoto, Ferenc Szidarovszky
2016 Frontiers in Applied Mathematics and Statistics  
This paper considers a continuous-time heterogeneous agent model of a financial market with one risky asset, two types of agents (i.e., the fundamentalists and the chartists), and three time delays. The chartist's demand is determined through a nonlinear function of the difference between the current price and a weighted moving average of the delayed prices whereas the fundamentalist's demand is governed by the difference between the current price and the fundamental value. The asset price
more » ... he asset price dynamics is described by a nonlinear delay differential equation. Two main results are analytically and numerically shown: (i) a single delay destabilizes the market price and generates cyclic oscillations around the equilibrium; (i) under multiple delays, stability loss and gain repeatedly occur as the length of the delay increases.
doi:10.3389/fams.2016.00015 fatcat:wv7cjdcga5ek5nzurnvt25e5w4