2000/12/21 by J. Doyne Farmer, Farmer, J. Doyne, Shareen Joshi +1
Economics, Econometrics and Finance · Physics and Astronomy · #Complex Systems and Time Series Analysis #FOS: Economics and business #FOS: Physical sciences #Statistical Mechanics (cond-mat.stat-mech) #Trading and Market Microstructure (q-fin.TR) #cond-mat.stat-mech #q-fin.TR
paper · pdf · doi:10.48550/arxiv.cond-mat/0012419
29 pages, 12 figures
arxiv created 2000/12/21 · openalex publication_date 2000/12/21 · arxiv updated 2009/11/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
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 trading strategies, showing how they amplify noise, induce structure in prices, and cause phenomena such as excess and clustered volatility.