A prognosis oriented microscopic stock market model

Details A prognosis oriented microscopic stock market model A prognosis oriented microscopic stock market model

1999-03-04

arxiv.org/abs/cond-mat/9903079v1

Physica A 267, 443 (1999)

Physics

Condensed Matter

Statistical Mechanics

14 pages RevTeX, 5 eps-figures included

Scientific paper

We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the supply and demand fixing after each round (time step) the new price of the stock according to which the limited buy and sell orders are then executed and new forecasts are made. We show via numerical simulation of this model that the distribution of price differences obeys an exponentially truncated Levy-distribution with a self similarity exponent mu~5.

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