FLUCTUATIONS AND MARKET FRICTION IN FINANCIAL TRADING

Bernd Rosenow ()
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Bernd Rosenow: Institut für Theoretische Physik, Universität zu Köln, Zülpicher Str. 77, D-50937 Köln, Germany

International Journal of Modern Physics C (IJMPC), 2002, vol. 13, issue 03, 419-425

Abstract: We study the relation between stock price changes and the difference in the volume of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation–dissipation theorem in physical systems. We empirically investigate fluctuations and market friction for a major US stock and find support for our model calculations.

Keywords: Price impact function; Langevin equation; dissipation–fluctuation theorem (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S012918310200322X

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