Financial Turbulence, Business Cycles and Intrinsic Time in an Artificial Economy

Article type: Research Article

Authors: Gonçalves, Carlos Pedro

Affiliations: Instituto Superior de Ciências Sociais e Políticas (ISCSP), Technical University of Lisbon, Lisbon, Portugal. E-mail: [email protected]

Abstract: The coevolving coupled dynamics of financial markets and real economies is addressed through an integrated model of an artificial economy in which a population of competing companies have their shares traded in a financial market dominated by value investors and arbitrageurs that evaluate the companies’ performance and adapt to market conditions. The coevolution between economy and financial market is operationalized through a quantum game that has by classical limit a coupled map lattice model with economic and financial chaotic dynamics. The connection between the business cycle, financial intrinsic time and scaling patterns of financial turbulence is addressed.

Keywords: Evolutionary financial economics, business cycle dynamics, financial turbulence, coupled map lattice, chaos, repeated quantum games

DOI: 10.3233/AF-2011-011

Journal: Algorithmic Finance, vol. 1, no. 2, pp. 141-156, 2011