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

Author

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  • Giulia Iori

    (University of Essex, Colchester, uk)

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.

Suggested Citation

  • Giulia Iori, 1999. "A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions," Finance 9905005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9905005
    Note: Type of Document - LaTex; prepared on Unix; to print on PostScript; pages: 12 ; figures: included
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    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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