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

Marco Li Calzi () and Paolo Pellizzari ()

Computational Economics from EconWPA

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.

Keywords: price dynamics; statistical properties of returns; behavioral and structural assumptions; agent-based simulations (search for similar items in EconPapers)
JEL-codes: G19 D84 C63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2002-07-12, Revised 2003-03-04
Note: Type of Document - pdf; prepared on Macintosh; to print on Postcript; pages: 19; figures: included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpco:0207001

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