We seek to develop a novel asset pricing model with heterogeneous traders.Fundamental traders expect that asset prices converge towards their intrinsic values, whereas chart traders Scrub Brushes rely on both price and volume signals to determine their orders.To be precise, the larger the trading volume, the more they believe in the persistence of the current price trend.Simulations of our nonlinear deterministic model reveal that interactions between fundamentalists and chartists may cause intricate endogenous price fluctuations.
Contrary to the intuition, we find that chart trading 3 Layered Christmas Shaker Ornament may increase market stability.