Options
On the inherent instability of international financial markets : natural nonlinear interactions between stock and foreign exchange markets
Westerhoff, Frank H.; Dieci, Roberto (2011): On the inherent instability of international financial markets : natural nonlinear interactions between stock and foreign exchange markets, Bamberg: BERG.
Faculty/Chair:
Author:
Publisher Information:
Year of publication:
2011
Pages:
Series ; Volume:
Language:
English
Abstract:
We develop a novel financial market model in which the stock markets of two countries are linked via and with the foreign exchange market. To be precise, there are domestic and foreign speculators in each of the two stock markets which rely either on linear technical or linear fundamental trading strategies to determine their orders. Since foreign stock market speculators require foreign currency to conduct their trades, all three markets are connected. Our setup entails a natural nonlinearity which may cause persistent endogenous price dynamics. Moreover, we analytically show that market interactions can destabilize the model’s fundamental steady state.
GND Keywords: ; ; ;
Kreditmarkt
Wechselkurs
Aktienanalyse
Dynamisches Modell
Keywords:
Stock prices; exchange rates; market stability; technical and fundamental analysis; nonlinear market interactions; endogenous dynamics.
RVK Classification:
Type:
Workingpaper
Activation date:
April 30, 2014
Versioning
Question on publication
Permalink
https://fis.uni-bamberg.de/handle/uniba/4512