Fundamentalists Clashing over the Book: A Study of Order-Driven Stock Markets
Abstract
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.Download Info
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Paper provided by EconWPA in its series Computational Economics with number 0207001.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://128.118.178.162
Related research
Keywords: price dynamics; statistical properties of returns; behavioral and structural assumptions; agent-based simulations;Other versions of this item:
- Marco Licalzi & Paolo Pellizzari, 2003. "Fundamentalists clashing over the book: a study of order-driven stock markets," Quantitative Finance, Taylor and Francis Journals, vol. 3(6), pages 470-480.
- G19 - Financial Economics - - General Financial Markets - - - Other
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-31 (All new papers)
- NEP-FIN-2002-07-31 (Finance)
- NEP-FMK-2002-07-31 (Financial Markets)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- LiCalzi, Marco & Pellizzari, Paolo, 2007.
"Simple market protocols for efficient risk sharing,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 31(11), pages 3568-3590, November.
- Marco LiCalzi & Paolo Pellizzari, 2005. "Simple market protocols for efficient risk sharing," Finance 0504019, EconWPA.
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- Paolo Pellizzari & Arianna Forno, 2007.
"A comparison of different trading protocols in an agent-based market,"
Journal of Economic Interaction and Coordination,
Springer, vol. 2(1), pages 27-43, June.
- Paolo Pellizzari & Arianna Dal Forno, 2006. "A comparison of different trading protocols in an agent-based market," Working Papers 140, Department of Applied Mathematics, Università Ca' Foscari Venezia.
- Paolo Pellizzari & Arianna Dal Forno, 2005. "A comparison of different trading protocols in an agent-based market," Computational Economics 0511001, EconWPA.
- Kirchler, Michael & Huber, Jurgen, 2007. "Fat tails and volatility clustering in experimental asset markets," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 1844-1874, June.
- 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.
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"Do Stylised Facts of Order Book Markets Need Strategic Behaviour?,"
Swiss Finance Institute Research Paper Series
07-20, Swiss Finance Institute.
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"Waiting times between orders and trades in double-auction markets,"
Physica A: Statistical Mechanics and its Applications,
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"The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows,"
Research Paper Series
152, Quantitative Finance Research Centre, University of Technology, Sydney.
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"Herding effects in order driven markets: The rise and fall of gurus,"
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