where xtc and ytc represent the chartist’s excess demand for stock and for money at period t, and pt+1c denotes the price expected by him. The chartist’s excess demand function for the stock is given by
where the parameter µ(0 < µ < 1) is a so-called error correction coefficient. Chartists’ decisions are based on observation of the past price-data. This type of trader, who simply extrapolates patterns of past prices, is a common stylized example, currently in popular use in heterogeneous agent models. It follows that chartists try to buy stock when they anticipate a rising price for the next period, and, in contrast, try to sell stock when they expect a falling price.