TY  - UNPD
A1  - Böhl, Gregor
A1  - Hommes, Cars
T1  - Rational vs. irrational beliefs in a complex world
T2  - Working paper series / Institute for Monetary and Financial Stability ; 156
N2  - Can boundedly rational agents survive competition with fully rational agents? The authors develop a highly nonlinear heterogeneous agents model with rational forward looking versus boundedly rational backward looking agents and evolving market shares depending on their relative performance. Their novel numerical solution method detects equilibrium paths characterized by complex bubble and crash dynamics. Boundedly rational trend-extrapolators amplify small deviations from fundamentals, while rational agents anticipate market crashes after large bubbles and drive prices back close to fundamental value. Overall rational and non-rational beliefs co-evolve over time, with time-varying impact, and their interaction produces complex endogenous bubble and crashes, without any exogenous shocks.
T3  - Working paper series / Institute for Monetary and Financial Stability - 156 
KW  - heterogeneous agents
KW  - trend-extrapolation
KW  - bubbles
KW  - numerical solution method
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/56453
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-564539
UR  - https://www.imfs-frankfurt.de/forschung/imfs-working-papers/details/publication/rational-vs-irrational-beliefs-in-a-complex-world.html
IS  - April 16, 2021
PB  - Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
CY  - Frankfurt am Main
ER  -