Agent-based models of market dynamics must strike a compromise between the structural assumptions that represent the trading mechanism and the behavioral assumptions that describe the rules by which traders take their decisions. We present a structurally detailed model of an order- driven stock market and show that a minimal set of behavioral assumptions suffices to generate a leptokurtic distribution of short- term log-returns. This result backs up the conjecture that the emergence of some statistical properties of financial time series is due to the microstructure of stock markets.
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Length: 19 pages Date of creation: 12 Jul 2002 Date of revision:
04 Mar 2003 Handle: RePEc:wpa:wuwpco:0207001
Note: Type of Document - pdf; prepared on Macintosh; to print on Postcript; pages: 19; figures: included Contact details of provider: Web page: http://129.3.20.41
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