The Price Dynamics of Common Trading Strategies

J. Farmer and Shareen Joshi

Working Papers from Santa Fe Institute

Abstract: A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses a market maker based method of price formation to study the price dynamics induced by several commonly used financial strategies, showing how they amplify noise, induce structure in prices, and cause phenomena such as excess and clustered volatility.

Date: 2000-12
New Economics Papers: this item is included in nep-fmk
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Journal Article: The price dynamics of common trading strategies (2002)
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