Feedback trading and intermittent market turbulence
Demosthenes Tambakis ()
Quantitative Finance, 2009, vol. 9, issue 4, 477-489
This paper studies the potential for complex asset return dynamics in a high-frequency, non-fundamental feedback trading model. Price adjustment is driven by the time-varying price impact of net orderflow. In tranquil times feedback trading has no impact on the price level. Given feedback trading intensities, as asset liquidity declines the market progressively becomes stressed and turbulent. Returns and absolute returns persistence are found to display power-law features, and episodes of turbulence are intermittent.
Keywords: Feedback trading; Price impact; Financial stability; Intermittence; Power law (search for similar items in EconPapers)
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Working Paper: Feedback Trading and Intermittent Market Turbulence (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:9:y:2009:i:4:p:477-489
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