We continue the investigation of a one-dimensional piecewise linear map with two discontinuity points. Such a map may arise from a simple asset-pricing model with heterogeneous speculators, which can help us to explain the intricate bull and bear behavior of financial markets. Our focus is on bifurcation structures observed in the chaotic domain of the map's parameter space, which is associated with robust multiband chaotic attractors. Such structures, related to the map with two discontinuities, have been not studied before. We show that besides the standard bandcount adding and bandcount incrementing bifurcation structures, associated with two partitions, there exist peculiar bandcount adding and bandcount incrementing structures involving all three partitions. Moreover, the map's three partitions may generate intriguing bistability phenomena.

1.
R.
Aggarwal
and
B.
Lucey
, “
Psychological barriers in gold prices?
,”
Rev. Financ. Econ.
16
,
217
230
(
2007
).
2.
V.
Avrutin
,
L.
Gardini
,
M.
Schanz
, and
I.
Sushko
, “
Bifurcations of chaotic attractors in one-dimensional piecewise smooth maps
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
24
(
8
),
1440012
(10 pages) (
2014
).
3.
V.
Avrutin
,
B.
Eckstein
, and
M.
Schanz
, “
The bandcount increment scenario. I: Basic structures
,”
Proc. R. Soc. A
464
(
2095
),
1867–1883
(
2008
).
4.
V.
Avrutin
,
B.
Eckstein
, and
M.
Schanz
, “
The bandcount increment scenario. II: Interior structures
,”
Proc. R. Soc. A
464
(
2097
),
2247–2263
(
2008
).
5.
V.
Avrutin
,
B.
Eckstein
, and
M.
Schanz
, “
The bandcount increment scenario. III: Deformed structures
,”
Proc. R. Soc. A
465
(
2101
),
41
57
(
2009
).
6.
V.
Avrutin
,
M.
Schanz
, and
B.
Schenke
, “
Coexistence of the bandcount-adding and bandcount-increment scenarios
,”
Discrete Dyn. Nat. Soc.
2011
,
681565
.
7.
V.
Avrutin
,
B.
Eckstein
,
M.
Schanz
, and
B.
Schenke
, “
Bandcount incrementing scenario revisited and floating regions within robust chaos
,”
Math. Comput. Simul.
95
,
23
38
(
2014
).
8.
V.
Avrutin
and
M.
Schanz
, “
On the fully developed bandcount adding scenario
,”
Nonlinearity
21
,
1077
1103
(
2008
).
9.
V.
Avrutin
,
M.
Schanz
, and
L.
Gardini
, “
Calculation of bifurcation curves by map replacement
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
20
(
10
),
3105
3135
(
2010
).
10.
V.
Avrutin
and
I.
Sushko
, “
A gallery of bifurcation scenarios in piecewise smooth 1D maps
,” in
Global Analysis of Dynamic Models in Economics, Finance and the Social Sciences
, edited by
G.-I.
Bischi
,
C.
Chiarella
, and
I.
Sushko
(
Springer
,
2012
), pp.
369–395
.
11.
P.
Boswijk
,
C.
Hommes
, and
S.
Manzan
, “
Behavioral heterogeneity in stock prices
,”
J. Econ. Dyn. Control
31
,
1938
1970
(
2007
).
12.
W.
Brock
and
C.
Hommes
, “
Heterogeneous beliefs and routes to chaos in a simple asset pricing model
,”
J. Econ. Dyn. Control
22
,
1235
1274
(
1998
).
13.
C.
Chiarella
, “
The dynamics of speculative behavior
,”
Ann. Oper. Res.
37
,
101
123
(
1992
).
14.
C.
Chiarella
,
R.
Dieci
, and
L.
Gardini
, “
The dynamic interaction of speculation and diversification
,”
Appl. Math. Finance
12
,
17
52
(
2005
).
15.
C.
Chiarella
,
R.
Dieci
, and
X.-Z.
He
, “
Heterogeneous expectations and speculative behaviour in a dynamic multi-asset framework
,”
J. Econ. Behav. Organ.
62
,
408
427
(
2007
).
16.
C.
Chiarella
,
R.
Dieci
, and
X.-Z.
He
, “
Heterogeneity, market mechanisms, and asset price dynamics
,” in
Handbook of Financial Markets: Dynamics and Evolution, edited by
T.
Hens
and
K. R.
Schenk-Hoppé
(
North-Holland
,
Amsterdam
,
2009
), pp.
277
344
.
17.
R.
Day
and
W.
Huang
, “
Bulls, bears and market sheep
,”
J. Econ. Behav. Organ.
14
,
299
329
(
1990
).
18.
R.
Day
, “
Complex dynamics, market mediation and stock price behavior
,”
North Am. Actuarial J.
1
,
1
16
(
1997
).
19.
R.
Franke
and
F.
Westerhoff
, “
Structural stochastic volatility in asset pricing dynamics: Estimation and model contest
,”
J. Econ. Dyn. Control
36
,
1193
1211
(
2012
).
20.
L.
Gardini
,
V.
Avrutin
, and
I.
Sushko
, “
Codimension-2 border collision bifurcations in one-dimensional discontinuous piecewise smooth maps
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
24
(
2
)
1450024
(
2014
).
21.
L.
Gardini
,
F.
Tramontana
,
V.
Avrutin
, and
M.
Schanz
, “
Border collision bifurcations in 1D PWL map and Leonov's approach
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
20
(
10
),
3085
3104
(
2010
).
22.
L.
Gardini
and
F.
Tramontana
, “
Border collision bifurcations in 1D PWL map with one discontinuity and negative jump: Use of the first return map
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
20
(
11
),
3529
3547
(
2010
).
23.
C.
Hommes
and
F.
Wagener
, “
Complex evolutionary systems in behavioral finance
,” in
Handbook of Financial Markets: Dynamics and Evolution, edited by
T.
Hens
and
K. R.
Schenk-Hoppé
(
North-Holland
,
Amsterdam
,
2009
), pp.
217
276
.
24.
C.
Hommes
, “
The heterogeneous expectations hypothesis: Some evidence from the lab
,”
J. Econ. Dyn. Control
35
,
1
24
(
2011
).
25.
C.
Hommes
,
Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems
(
Cambridge University Press.
Cambridge
,
2013
).
26.
W.
Huang
and
Z.
Chen
, “
Modelling regional linkage of financial markets
,”
J. Econ. Behav. Organ.
99
,
18
31
(
2014
).
27.
W.
Huang
and
R.
Day
Chaotically switching bear and bull markets: The derivation of stock price distributions from behavioral rules
,” in
Nonlinear Dynamics and Evolutionary Economics
, edited by
R.
Day
and
P.
Chen
(
Oxford University Press
,
Oxford
,
1993
), pp.
169
182
.
28.
W.
Huang
,
H.
Zheng
, and
W. M.
Chia
, “
Financial crisis and interacting heterogeneous agents
,”
J. Econ. Dyn. Control
34
,
1105
1122
(
2010
).
29.
W.
Huang
and
H.
Zheng
, “
Financial crisis and regime-dependent dynamics
,”
J. Econ. Behav. Organ.
82
,
445
461
(
2012
).
30.
W.
Huang
,
H.
Zheng
, and
W. M.
Chia
, “
Asymmetric returns, gradual bubbles and sudden crashes
,”
Eur. J. Finance
19
,
420
437
(
2013
).
31.
J. P.
Keener
, “
Chaotic behavior in piecewise continuous difference equations
,”
Trans. Am. Math. Soc.
261
(
2
),
589
604
(
1980
).
32.
A.
Kirman
, “
Epidemics of opinion and speculative bubbles in financial markets
,” in
Money and Financial Markets
, edited by
T.
Mark
(
Blackwell
,
Oxford
,
1991
), pp.
354
368
.
33.
N. N.
Leonov
, “
On a pointwise mapping of a line into itself
,”
Radiofisica
2
(
6
),
942
956
(
1959
).
34.
N. N.
Leonov
, “
On a discontinuous pointwise mapping of a line into itself
,”
Dokl. Acad. Nauk SSSR
143
(
5
),
1038
1041
(
1962
).
35.
J.
Li
and
J.
Yu
, “
Investor attention, psychological anchors, and stock return predictability
,”
J. Financ. Econ.
104
,
401
419
(
2012
).
36.
T.
Lux
, “
Herd behaviour, bubbles and crashes
,”
Econ. J.
105
,
881
896
(
1995
).
37.
T.
Lux
, “
Stochastic behavioural asset-pricing models and the stylized facts
,” in
Handbook of Financial Markets: Dynamics and Evolution
, edited by
T.
Hens
and
K. R.
Schenk-Hoppé
(
North-Holland
,
Amsterdam
,
2009
), pp.
161
216
.
38.
T.
Lux
and
M.
Marchesi
, “
Scaling and criticality in a stochastic multi-agent model of a financial market
,”
Nature
397
,
498
500
(
1999
).
39.
L.
Menkhoff
and
M.
Taylor
, “
The obstinate passion of foreign exchange professionals: Technical analysis
,”
J. Econ. Lit.
45
,
936
972
(
2007
).
40.
A.
Panchuk
,
I.
Sushko
,
B.
Schenke
, and
V.
Avrutin
, “
Bifurcation structure in bimodal piecewise linear map
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
23
(
12
),
1330040
(
2013
).
41.
A.
Panchuk
,
I.
Sushko
, and
V.
Avrutin
, “
Bifurcation structures in a bimodal piecewise linear map: Chaotic dynamics
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
25
(3),
1530006
(
2015
).
42.
N.
Schmitt
and
F.
Westerhoff
, “
Speculative behavior and the dynamics of interacting stock markets
,”
J. Econ. Dyn. Control
45
,
262
288
(
2014
).
43.
N.
Schmitt
and
F.
Westerhoff
, “
Heterogeneity, spontaneous coordination and extreme events within large-scale and small-scale agent-based financial market models
,”
J. Evol. Econ.
27
,
1041
1070
(
2017
).
44.
N.
Schmitt
and
F.
Westerhoff
, “
On the bimodality of the distribution of the S&P 500's distortion: Empirical evidence and theoretical explanations
,”
J. Econ. Dyn. Control
80
,
34
53
(
2017
).
45.
R.
Shiller
,
Irrational Exuberance
(
Princeton University Press
,
Princeton
,
2016
).
46.
I.
Sushko
,
V.
Avrutin
, and
L.
Gardini
, “
Bifurcation structure in the skew tent map and its application as a border collision normal form
,”
J. Differ. Equations Appl.
22
,
1040
1087
(
2015
).
47.
I.
Sushko
and
L.
Gardini
, “
Degenerate bifurcations and border collisions in piecewise smooth 1D and 2D maps
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
20
(
7
),
2045
2070
(
2010
).
48.
I.
Sushko
,
L.
Gardini
, and
V.
Avrutin
, “
Nonsmooth one-dimensional maps: Some basic concepts and denitions
,”
J. Differ. Equations Appl.
22
,
1816
1870
(
2016
).
49.
I.
Sushko
,
F.
Tramontana
,
F.
Westerhoff
, and
V.
Avrutin
, “
Symmetry breaking in a bull and bear financial market model
,”
Chaos, Solitons Fractals
79
,
57
72
(
2015
).
50.
F.
Tramontana
,
L.
Gardini
,
R.
Dieci
, and
F.
Westerhoff
, “
The emergence of ‘bull and bear’ dynamics in a nonlinear bull and bear dynamics in a nonlinear model of interacting markets
,”
Discrete Dyn. Nat. Soc.
2009
,
310471
.
51.
F.
Tramontana
,
F.
Westerhoff
, and
L.
Gardini
, “
On the complicated price dynamics of a simple one-dimensional discontinuous financial market model with heterogeneous interacting traders
,”
J. Econ. Behav. Organ.
74
,
187
205
(
2010
).
52.
F.
Tramontana
,
L.
Gardini
,
V.
Avrutin
, and
M.
Schanz
, “
Period adding in piecewise linear maps with two discontinuities
,”
Int. J. Bifurcation Chaos Appl. Sci. Eng.
22
(
3
),
1250068
(
2012
).
53.
F.
Tramontana
,
F.
Westerhoff
, and
L.
Gardini
, “
The bull and bear market model of Huang and Day: Some extensions and new results
,”
J. Econ. Dyn. Control
37
,
2351
2370
(
2013
).
54.
F.
Tramontana
,
F.
Westerhoff
, and
L.
Gardini
, “
One-dimensional maps with two discontinuity points and three linear branches: Mathematical lessons for understanding the dynamics of financial markets
,”
Decis. Econ. Finance
37
,
27
51
(
2014
).
55.
F.
Tramontana
,
F.
Westerhoff
, and
L.
Gardini
, “
A simple financial market model with chartists and fundamentalists: Market entry levels and discontinuities
,”
Math. Comput. Simul.
108
,
16
40
(
2015
).
56.
F.
Westerhoff
, “
Anchoring and psychological barriers in foreign exchange markets
,”
J. Behav. Finance
4
,
65
70
(
2003
).
57.
F.
Westerhoff
, “
Exchange rate dynamics: A nonlinear survey
,” in
Handbook of Research on Complexity, edited by
J. B.
Rosser
, Jr.
(
Edward Elgar
,
Cheltenham
,
2009
), pp.
287
325
.
58.

Recall that a basic cycle has only one point in the left (right) partition of the map, while all its other points are located in the right (left) partition.

59.

Clearly, if one point of cycle Oσ collides with a particular image of a critical point, the other points of Oσ also collide with respective images of the same critical point. We choose the point of Oσ that collides with image of the smallest rank, to get the simplest expression for the bifurcation condition.

You do not currently have access to this content.