PRICE FORMATION BASED ON PARTICLE-CLUSTER AGGREGATION

Shijun Wang () and Changshui Zhang ()
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Shijun Wang: Laboratory of Intelligent Technology and Systems, Department of Automation, Tsinghua University, Beijing 100084, China
Changshui Zhang: Laboratory of Intelligent Technology and Systems, Department of Automation, Tsinghua University, Beijing 100084, China

International Journal of Modern Physics C (IJMPC), 2005, vol. 16, issue 11, 1803-1810

Abstract: In the present work, we propose a microscopic model of financial markets based on particle-cluster aggregation on a two-dimensional small-world information network in order to simulate the dynamics of the stock markets. "Stylized facts" of the financial market time series, such as fat-tail distribution of returns, volatility clustering and multifractality, are observed in the model. The results of the model agree with empirical data taken from historical records of the daily closures of the NYSE composite index.

Keywords: Econophysics; price dynamics; small-world network; particle-cluster aggregation; 89.65.Gh; 89.75.Hc; 47.54.+r; 61.43.Hv (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1142/S012918310500831X

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