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Fundamentalists Clashing over the Book: A Study of Order-Driven Stock Markets

Author

Listed:
  • Marco LiCalzi

    (Universita' di Venezia)

  • Paolo Pellizzari

    (Universita' di Venezia)

Abstract

Agent-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.

Suggested Citation

  • Marco LiCalzi & Paolo Pellizzari, 2002. "Fundamentalists Clashing over the Book: A Study of Order-Driven Stock Markets," Computational Economics 0207001, University Library of Munich, Germany, revised 04 Mar 2003.
  • Handle: RePEc:wpa:wuwpco:0207001
    Note: Type of Document - pdf; prepared on Macintosh; to print on Postcript; pages: 19; figures: included
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    price dynamics; statistical properties of returns; behavioral and structural assumptions; agent-based simulations;

    JEL classification:

    • 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

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