Dynamics of beliefs and learning under a<inf>L</inf>-procesess - The heterogeneous case

Chiarella, C; He, XZ

Dynamics of beliefs and learning under a<inf>L</inf>-procesess - The heterogeneous case

Chiarella, C He, XZ

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Publication Type:: Journal Article
Citation:: Journal of Economic Dynamics and Control, 2003, 27 (3), pp. 503 - 531
Issue Date:: 2003-01-01

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Field	Value	Language
dc.contributor.author	Chiarella, C	en_US
dc.contributor.author	He, XZ https://orcid.org/0000-0003-1446-9996	en_US
dc.date.issued	2003-01-01	en_US
dc.identifier.citation	Journal of Economic Dynamics and Control, 2003, 27 (3), pp. 503 - 531	en_US
dc.identifier.issn	0165-1889	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5124
dc.description.abstract	This paper studies a class of models in which agents' expectations influence the actual dynamics while the expectations themselves are the outcome of some recursive processes with bounded memory. Under the assumptions of heterogeneous expectations (or beliefs) and that the agents update their expectations by recursive L- and general aL-processes, the dynamics of the resulting expectations and recursive schemes are analyzed. It is shown that the dynamics of the system, including stability, instability and bifurcation, are affected differently by the recursive processes. The cobweb model with a simple heterogeneous expectation scheme is employed as an example to illustrate the stability results, the various types of bifurcations and the routes to complicated price dynamics. In particular, the double-edged effect of heterogeneity on the dynamics of the model is demonstrated. © 2002 Elsevier Science B.V. All rights reserved.	en_US
dc.relation.ispartof	Journal of Economic Dynamics and Control	en_US
dc.relation.isbasedon	10.1016/S0165-1889(01)00059-8	en_US
dc.subject.classification	Economics	en_US
dc.title	Dynamics of beliefs and learning under a<inf>L</inf>-procesess - The heterogeneous case	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	27	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	27	en_US

Abstract:

This paper studies a class of models in which agents' expectations influence the actual dynamics while the expectations themselves are the outcome of some recursive processes with bounded memory. Under the assumptions of heterogeneous expectations (or beliefs) and that the agents update their expectations by recursive L- and general aL-processes, the dynamics of the resulting expectations and recursive schemes are analyzed. It is shown that the dynamics of the system, including stability, instability and bifurcation, are affected differently by the recursive processes. The cobweb model with a simple heterogeneous expectation scheme is employed as an example to illustrate the stability results, the various types of bifurcations and the routes to complicated price dynamics. In particular, the double-edged effect of heterogeneity on the dynamics of the model is demonstrated. © 2002 Elsevier Science B.V. All rights reserved.

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http://hdl.handle.net/10453/5124