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<p>This paper presents a model in which fundamentalists, absolute momentum traders, and cross-sectional momentum traders interact in a financial market with two risky assets. We assume that the excess demand of fundamentalists is described by a general polynomial function, with terms up to cubic order. We demonstrate that the combined effect of nonlinearity, fundamentalists, and momentum traders is effective in generating both bull and bear market dynamics. Additionally, we employ a stochastic version of our deterministic model to generate simulated time series that replicate the stylized facts—such as asymmetry, excess kurtosis, and volatility clustering—of two energy markets: the Pennsylvania–New Jersey–Maryland (PJM) electricity market and the Queensland electricity market (QLD).</p>

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Heterogeneous traders: endogenous uncertainty in financial markets

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年9月8日

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  • Serena Brianzoni,
  • Giovanni Campisi,
  • Graziella Pacelli

摘要

This paper presents a model in which fundamentalists, absolute momentum traders, and cross-sectional momentum traders interact in a financial market with two risky assets. We assume that the excess demand of fundamentalists is described by a general polynomial function, with terms up to cubic order. We demonstrate that the combined effect of nonlinearity, fundamentalists, and momentum traders is effective in generating both bull and bear market dynamics. Additionally, we employ a stochastic version of our deterministic model to generate simulated time series that replicate the stylized facts—such as asymmetry, excess kurtosis, and volatility clustering—of two energy markets: the Pennsylvania–New Jersey–Maryland (PJM) electricity market and the Queensland electricity market (QLD).