Chaotic Stock Market Dynamics Explained Using Fractal Geometry and Heterogeneous Agents
The Fractal Markets Hypothesis posits that financial markets function as chaotic dynamic systems exhibiting self-similarity across time scales rather than adhering to efficient market equilibrium. Stability within this domain emerges from heterogeneous agents possessing varying investment horizons and distinct expectations, where crashes are triggered by collective shifts toward identical beliefs rather than accurate fundamental valuations. Consequently, return distributions follow power laws characterized by scale invariance, rendering standard variance-based models inadequate for describing the inevitable occurrence of extreme events typical in non-equilibrium economic systems.
Chaotic Stock Market Dynamics Explained Using Fractal Geometry and Heterogeneous Agents
The Fractal Markets Hypothesis posits that financial markets function as chaotic dynamic systems exhibiting self-similarity across time scales rather than adhering to efficient market equilibrium. St…