at Google ScholarTitle data
Baumann, Michael Heinrich ; Baumann, Michaela ; Erler, Alexander:
Limitations of stabilizing effects of fundamentalists facing positive feedback traders.
2017
Event: The 49th Money, Macro and Finance Research Group Annual Conference
, 05.-07.09.2017
, King's College, Strand, London, UK.
(Conference item: Conference
,
Speech
)
Project information
| Project title: |
Project's official title Project's id Promotionsstipendium No information |
|---|---|
| Project financing: |
Bundesministerium für Bildung und Forschung Hanns-Seidel-Stiftung The work of Michael Heinrich Baumann is supported by a scholarship of Hanns Seidel Stiftung e.V. (HSS) by means of Bundesministerium für Bildung und Forschung (BMBF). |
Abstract in another language
We analyze financial interactions between fundamentalists and chartists within a heterogeneous agent model, focusing on discovering whether the presence of fundamentalists is enough to stabilize prices. In contrast to related work, which is based on simulations, we analytically prove that the presence of fundamentalists is not sufficient to avoid asset price bubbles. The behavior of trend followers can result in exploding prices irrespective of fundamentalists' investment decisions. We derive the upper boundaries for positive feedback traders' investments necessary to avoid exploding prices. In this situation, intervention measures might be necessary in order to stabilize stock/asset markets.