FLUCTUATIONS AND MARKET FRICTION IN FINANCIAL TRADING

2001/07/06 by Bernd Rosenow · 2 citations
Economics, Econometrics and Finance · Physics and Astronomy · #Complex Systems and Time Series Analysis #Financial Risk and Volatility Modeling #Market Dynamics and Volatility #cond-mat

paper · pdf · doi:10.1142/s012918310200322x

Acknowledges the authors of cond-mat/0106657 for generous support and for making their results available prior to publication

arxiv created 2001/07/06 · openalex publication_date 2002/03/01 · arxiv updated 2009/11/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We study the relation between stock price changes and the difference in the volume of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation–dissipation theorem in physical systems. We empirically investigate fluctuations and market friction for a major US stock and find support for our model calculations.

Citations

• ARCH modeling in finance
• Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation
• Generalized autoregressive conditional heteroskedasticity
• Über die von der molekularkinetischen Theorie der Wärme geforderte Bewegung von in ruhenden Flüssigkeiten suspendierten Teilchen
• The Variation of Certain Speculative Prices

Cited by

• THEORY OF SELF-SIMILAR OSCILLATORY FINITE-TIME SINGULARITIES
• Relation between bid–ask spread, impact and volatility in order-driven markets
• Path integral approach to Asian options in the Black–Scholes model