On the inherent instability of international financial markets : natural nonlinear interactions between stock and foreign exchange markets
Faculty/Professorship: | Economic Policy |
Author(s): | Dieci, Roberto; Westerhoff, Frank H. ![]() |
Other Contributing Persons: | Stübben, Felix |
Corporate Body: | BERG (Bamberg Economic Research Group) |
Publisher Information: | Bamberg : opus |
Year of publication: | 2013 |
Pages: | 56 |
ISBN: | 978-3-931052-89-8 |
Series ; Volume: | BERG working paper series ; 79 |
Source/Other editions: | zuerst erschienen im BERG-Verlag, 2011 |
Year of first publication: | 2011 |
Language(s): | English |
Licence: | German Act on Copyright |
URN: | urn:nbn:de:bvb:473-opus4-31905 |
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: | QK 650 |
Type: | Workingpaper |
URI: | https://fis.uni-bamberg.de/handle/uniba/1394 |
Year of publication: | 20. December 2013 |
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