Affiliation:
1. Department of Accounting, Finance and Management, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, UK
Abstract
We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. A generalized version of the Random Field Ising Model (RFIM) is introduced to describe trading behavior. Imitation effects, which induce agents to trade, can generate avalanches in trading volume and large gaps in demand and supply. A trade friction is introduced which, by responding to price movements, creates a feedback mechanism on future trading and generates volatility clustering.
Publisher
World Scientific Pub Co Pte Lt
Subject
Computational Theory and Mathematics,Computer Science Applications,General Physics and Astronomy,Mathematical Physics,Statistical and Nonlinear Physics
Cited by
64 articles.
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