Price Dynamics in an Order-Driven Market with Bayesian Learning

Jiahua Wang, Hongliang Zhu and Dongxin Li

Complexity, 2018, vol. 2018, 1-15

Abstract:

In this paper, we have developed a model of limit order book with learning mechanism and investigated its price dynamics. In this model, continuous Bayesian learning is introduced to describe the dynamics of self-adjusting learning mechanism of agents, which can result in some important stylized facts of limit order markets. This study also provides some behavioral explanations for these well-known stylized facts that are commonly observed in the financial markets.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:hin:complx:8254068

DOI: 10.1155/2018/8254068

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