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Price Dynamics in an Order-Driven Market with Bayesian Learning

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  • Jiahua Wang
  • Hongliang Zhu
  • Dongxin Li

Abstract

In this paper, we have developed a model of limit order book with learning mechanism and investigated its price dynamics. In this model, continuous Bayesian learning is introduced to describe the dynamics of self-adjusting learning mechanism of agents, which can result in some important stylized facts of limit order markets. This study also provides some behavioral explanations for these well-known stylized facts that are commonly observed in the financial markets.

Suggested Citation

  • Jiahua Wang & Hongliang Zhu & Dongxin Li, 2018. "Price Dynamics in an Order-Driven Market with Bayesian Learning," Complexity, Hindawi, vol. 2018, pages 1-15, November.
    • Handle: RePEc:hin:complx:8254068
    DOI: 10.1155/2018/8254068
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    Cited by:

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