1999/05/13 by Giulia Iori, Iori, Giulia · 2 citations
Physics and Astronomy · #Adaptation and Self-Organizing Systems (nlin.AO) #FOS: Physical sciences #adap-org #nlin.AO
paper · pdf · doi:10.48550/arxiv.adap-org/9905005
arxiv created 2000/07/25 · arxiv updated 2009/11/30
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 either from an aggregate exogenous shock or, even in its absence, purely from communication and imitation among traders. A trade friction is introduced which, by responding to price movements, creates a feedback mechanism on future trading and generates volatility clustering.