On financial markets trading
AbstractStarting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has introduced realistic constraints in order to confine money, time, gain and loss within an appropriate range. The main ingredients are local and global coupling, randomness, Zipf distribution of resources and price formation when inserting an order. The simulation starts with the initial public offer and comprises the broadcasting of news/advertisements and the building of the book, where all the selling and buying orders are stored. The model is able to reproduce fat tails and clustered volatility, the two most significant characteristics of a real stockmarket, being driven by very intuitive parameters.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 289 (2001)
Issue (Month): 3 ()
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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Econophysics; Herding behavior; Artificial financial market; Coupling;
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- Marco LiCalzi & Paolo Pellizzari, 2002.
"Fundamentalists Clashing over the Book: A Study of Order-Driven Stock Markets,"
0207001, EconWPA, revised 04 Mar 2003.
- Marco Licalzi & Paolo Pellizzari, 2003. "Fundamentalists clashing over the book: a study of order-driven stock markets," Quantitative Finance, Taylor & Francis Journals, vol. 3(6), pages 470-480.
- LiCalzi, Marco & Pellizzari, Paolo, 2006.
"Breeds of risk-adjusted fundamentalist strategies in an order-driven market,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 359(C), pages 619-633.
- Marco LiCalzi & Paolo Pellizzari, 2005. "Breeds of risk-adjusted fundamentalist strategies in an order- driven market," Computational Economics 0506001, EconWPA.
- Boer-Sorban, K. & de Bruin, A. & Kaymak, U., 2005. "On the Design of Artificial Stock Markets," ERIM Report Series Research in Management ERS-2005-001-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
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