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A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions

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  • Iori, Giulia

Abstract

We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model synchronization effects, which generate large fluctuations in returns, can arise either from an aggregate exogenous shock or, even in its absence, purely from communication and imitation among traders. A trade friction is introduced which, by responding to price movements, creates a feedback mechanism on future trading and generates volatility clustering.
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  • Iori, Giulia, 2002. "A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions," Journal of Economic Behavior & Organization, Elsevier, vol. 49(2), pages 269-285, October.
  • Handle: RePEc:eee:jeborg:v:49:y:2002:i:2:p:269-285
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    More about this item

    JEL classification:

    • G - Financial Economics
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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