Short-term equity dynamics and endogenous market fluctuations

Ted Theodosopoulos and Muffasir Badshah

Papers from arXiv.org

Abstract: We present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control problem for maximizing price regularity and stability while minimizing entanglement with the market, representing the NYSE specialists' affirmative obligation to maintain `fair and orderly markets'.

Date: 2004-06, Revised 2004-09
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