IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Scaling and Criticality in a Stochastic Multi-Agent Model of a Financial Market

Listed author(s):
  • Lux, T.
  • M. Marchesi

This paper reports statistical analyses performed on simulated data from a stochastic multi-agent model of speculative behaviour in a financial market. The price dynamics resulting from this artificial market process exhibits the same type of scaling laws as do empirical data from stock markets and foreign exchange markets: (i) one observes scaling in the probability distribution of relative price changes with a Pareto exponent around 2.6, (ii) volatility shows significant long-range correlation with a self-similarity parameter H around 0.85. This happens although we assume that news about the intrinsic or fundamental value of the asset follows a white noise process and, hence, incorporation of news about fundamental factors is insufficient to explain either of the characteristics (i) or (ii). As a consequence, in our model, the main stylised facts of financial data originate from the working of the market itself and one need not resort to scaling in unobservable extraneous signals as an explanation of the source of scaling in financial prices. The emergence of power laws can be explained by the existence of a critical state which is repeatedly approached in the course of the system's development.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 438.

in new window

Length: pages
Date of creation:
Date of revision: Jul 1998
Handle: RePEc:bon:bonsfb:438
Contact details of provider: Postal:
Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany

Fax: +49 228 73 6884
Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bon:bonsfb:438. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.