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Dynamics of price and trading volume in a spin model of stock markets with heterogeneous agents

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  • Taisei Kaizoji

    (ICU Tokyo)

  • Stefan Bornholdt

    (U Kiel)

  • Yoshi Fujiwara

    (KRC Kyoto)

Abstract

The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and find that it is closely related to trading volume as observed in real markets. The cumulative distribution of log returns exhibits scaling with exponents steeper than 2 and scaling is observed in the distribution of transition times between bull and bear markets.

Suggested Citation

  • Taisei Kaizoji & Stefan Bornholdt & Yoshi Fujiwara, 2002. "Dynamics of price and trading volume in a spin model of stock markets with heterogeneous agents," Papers cond-mat/0207253, arXiv.org.
  • Handle: RePEc:arx:papers:cond-mat/0207253
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    References listed on IDEAS

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    1. Bak, P. & Paczuski, M. & Shubik, M., 1997. "Price variations in a stock market with many agents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 430-453.
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    4. Parameswaran Gopikrishnan & Vasiliki Plerou & Xavier Gabaix & H. Eugene Stanley, 2000. "Statistical Properties of Share Volume Traded in Financial Markets," Papers cond-mat/0008113, arXiv.org.
    5. Fujiwara, Yoshi & Fujisaka, Hirokazu, 2001. "Coarse-graining and self-similarity of price fluctuations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 294(3), pages 439-446.
    6. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
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    10. Kaizoji, Taisei, 2000. "Speculative bubbles and crashes in stock markets: an interacting-agent model of speculative activity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(3), pages 493-506.
    11. Yanhui Liu & Parameswaran Gopikrishnan & Pierre Cizeau & Martin Meyer & Chung-Kang Peng & H. Eugene Stanley, 1999. "The statistical properties of the volatility of price fluctuations," Papers cond-mat/9903369, arXiv.org, revised Mar 1999.
    12. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1992. "Stock Prices and Volume," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 199-242.
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