Fundamentalists Clashing over the Book: A Study of Order-Driven Stock Markets
AbstractAgent-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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Bibliographic InfoPaper 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
Note: Type of Document - pdf; prepared on Macintosh; to print on Postcript; pages: 19; figures: included
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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 & 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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