"BEHAVIORAL ECONOMETRIC" INTERPRETATION OF DYNAMIC SUPPLY AND DEMAND FUNCTIONS IN A MARKET PRICING MODEL

Joseph K. Wang ()
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Joseph K. Wang: Pinetree Management, Inc., 460 West Mountain Road, Sparta NJ 07871, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2001, vol. 04, issue 04, 635-650

Abstract: I present a model of stock market price fluctuations incorporating effects of share supply as a history-dependent function of previous purchases and share demand as a function of price deviation from moving averages. I discuss interpretation of model parameters and of the form of dynamically evolving supply and demand functions. Parameters and dynamic supply and demand functions can be regarded as providing quantitative behavioral characterization of investors within markets. Price charts generated assuming different dynamic supply functions exhibit structure consistent with the hypothesis that dominant investor behavior is different on different time scales.

Keywords: Behavioral economics; complex deterministic systems; market pricing; tatonnement (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1142/S0219024901001152

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