Discrete Dynamics in Nature and Society
Volume 2011 (2011), Article ID 309572, 12 pages
http://dx.doi.org/10.1155/2011/309572
Research Article

Analysis of a Heterogeneous Trader Model for Asset Price Dynamics

Andrew Foster1 and Natasha Kirby2

1Department of Mathematics and Statistics, Memorial University of Newfoundland, St. John's, NL, Canada A1C 5S7
2Department of Applied Mathematics, University of Western Ontario, London, ON, Canada N6A 5B7

Received 27 June 2011; Accepted 22 July 2011

Academic Editor: Ugurhan Mugan

Copyright © 2011 Andrew Foster and Natasha Kirby. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We examine an asset pricing model of Westerhoff (2005). The model incorporates heterogeneous beliefs among traders, specifically fundamentalists and trend-chasing chartists. The form of the model is shown here to be a nonlinear planar map. Since it contains a single parameter, the model may be considered the simplest effective model yet derived for financial asset pricing with heterogeneous trading. Analysis of the map yields results for stability and bifurcations of fixed points and periodic orbits. The model has intricate attractor basin behavior and global bifurcations to chaos: symmetric homoclinic bifurcation and boundary crisis.