The oscillation of stock price by majority orienting traders with investment position

T. Yamashita and Y. Itoh

Physica A: Statistical Mechanics and its Applications, 2007, vol. 374, issue 2, 764-772

Abstract: We consider an interacting particle system for the stock price fluctuation. The change of the stock price with a feedback by the price considering the herding behavior (majority orienting behavior) of traders, gives the van der Pol equation as a deterministic approximation. Considering the investment position of each trader, we introduce the delayed van der Pol equation. The history of investment positions, for example sell or buy, of each trader for a stock makes a memory effect, which is modeled by using the time retardation. The delayed van der Pol equation model seems to be natural and explains typical phenomena, for example triangle pattern, volatility jumps, price jumps and price trends, known for the time series of a stock price.

Keywords: Stock price; Delayed van der Pol equation; Poincare–Bendixson theorem; Behavioral finance (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:374:y:2007:i:2:p:764-772

DOI: 10.1016/j.physa.2006.08.021

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