THE OPINION GAME: STOCK PRICE EVOLUTION FROM MICROSCOPIC MARKET MODELING

Anton Bovier (), Jiří Černý () and Ostap Hryniv ()
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Anton Bovier: Weierstraß–Institut für Angewandte Analysis und Stochastik, Mohrenstraße 39, 10117 Berlin, Germany;
Jiří Černý: Weierstraß–Institut für Angewandte Analysis und Stochastik, Mohrenstraße 39, 10117 Berlin, Germany
Ostap Hryniv: Department of Mathematical Sciences, University of Durham, South Rd, Durham DH1 3LE, United Kingdom

International Journal of Theoretical and Applied Finance (IJTAF), 2006, vol. 09, issue 01, 91-111

Abstract: We propose a class of Markovian agent based models for the time evolution of a share price in an interactive market. The models rely on a microscopic description of a market of buyers and sellers who change their opinion about the stock value in a stochastic way. The actual price is determined in realistic way by matching (clearing) offers until no further transactions can be performed. Some analytic results for simple special cases are presented. We also propose basic interaction mechanisms and show in simulations that these already reproduce certain particular features of prices in real stock markets.

Keywords: Stock prices; financial markets; statistical mechanics; stochastic dynamics (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0219024906003421

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