A prognosis oriented microscopic stock market model

Christian Bußhaus and Heiko Rieger

Physica A: Statistical Mechanics and its Applications, 1999, vol. 267, issue 3, 443-452

Abstract: We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the supply and demand fixing after each round (time step) the new price of the stock according to which the limited buy and sell orders are then executed and new forecasts are made. We show via numerical simulation of this model that the distribution of price differences obeys an exponentially truncated Levy-distribution with a self similarity exponent μ≈5.

Keywords: Stock market models; Interacting investors; Price fluctuations; Truncated Levy distribution (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:267:y:1999:i:3:p:443-452

DOI: 10.1016/S0378-4371(99)00060-6

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