Preprint MA 60/2007

A simple stock market model involving intrinsic value dynamics

Jan Melecký

The stock market model established by Chiarella is founded on fundamentalist and chartist trading strategies. We add the intrinsic value of stock dynamics in this model. Our model includes three state variables, i.e., the market price of stock, the intrinsic value of stock and the chartists' estimate of the current trend in the market stock price. The results of the local stability analysis are compared with the ones obtained by Chiarella.