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Short-term equity dynamics and endogenous market fluctuations

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  • Ted Theodosopoulos
  • Muffasir Badshah

Abstract

We present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control problem for maximizing price regularity and stability while minimizing entanglement with the market, representing the NYSE specialists' affirmative obligation to maintain `fair and orderly markets'.

Suggested Citation

  • Ted Theodosopoulos & Muffasir Badshah, 2004. "Short-term equity dynamics and endogenous market fluctuations," Papers math/0406067, arXiv.org, revised Sep 2004.
    • Handle: RePEc:arx:papers:math/0406067
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    References listed on IDEAS

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    5. 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.
    6. Day, Richard H. & Shafer, Wayne, 1987. "Ergodic fluctuations in deterministic economic models," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 339-361, September.
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