A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions

Giulia Iori

Finance from University Library of Munich, Germany

Abstract: We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model, synchronization effects, which generate large fluctuations in returns, can arise purely from communication and imitation among traders. The key element in the model is the introduction of a trade friction which, by responding to price movements, creates a feedback mechanism on future trading and generates volatility clustering. The model also reproduces the empirically observed positive cross- correlation between volatility and trading volume.

Keywords: Volatility clustering; fat tails; trading volume; herd behaviour. (search for similar items in EconPapers)
JEL-codes: C63 G12 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2000-07-25
New Economics Papers: this item is included in nep-evo and nep-fmk
Note: Type of Document - Tex; prepared on unix; to print on PostScript; pages: 28; figures: included
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions (2002)
Working Paper: A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0004007

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