On financial markets trading

Lorenzo Matassini and Fabio Franci

Physica A: Statistical Mechanics and its Applications, 2001, vol. 289, issue 3, 526-542

Abstract: Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has introduced realistic constraints in order to confine money, time, gain and loss within an appropriate range. The main ingredients are local and global coupling, randomness, Zipf distribution of resources and price formation when inserting an order. The simulation starts with the initial public offer and comprises the broadcasting of news/advertisements and the building of the book, where all the selling and buying orders are stored. The model is able to reproduce fat tails and clustered volatility, the two most significant characteristics of a real stockmarket, being driven by very intuitive parameters.

Keywords: Econophysics; Herding behavior; Artificial financial market; Coupling (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:289:y:2001:i:3:p:526-542

DOI: 10.1016/S0378-4371(00)00548-3

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