Expectations, Price Fluctuations and Lorenz Attractor

Olkhov, Victor (2018): Expectations, Price Fluctuations and Lorenz Attractor.

Abstract

This paper describes expectations and Buy-Sell transactions of selected Stokes between economic agents and Exchange on economic space as ground for modeling trading volume and price fluctuations. We study simple model of mutual relations between transactions and expectations and derive economic equations that describe disturbances of price, trading volume and expectations. We obtain simple harmonic oscillations for price fluctuations. We show that our model economic equations can take form of Lorenz attractor. Our approximation of transactions and expectations and economic equations on disturbances of price, trading volume and expectations allows apply dynamical systems methods for modeling chaotic behavior of economic and financial systems.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Transactions; Expectations; Economic Space; Stochastic Prices
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C60 - General; E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E0 - General > E03 - Behavioral Macroeconomics; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; G - Financial Economics > G0 - General > G02 - Behavioral Finance: Underlying Principles; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

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