Life in the Stockmarket - a Realistic Model for Trading

Details Life in the Stockmarket - a Realistic Model for Trading Life in the Stockmarket - a Realistic Model for Trading

2000-08-31

arxiv.org/abs/cond-mat/0008466v1

Physics

Condensed Matter

Statistical Mechanics

4 pages, 4 figures

Scientific paper

We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated volatility arise as a consequence of the collective behavior of agents: With their interaction they determine a price which in turn affects their future way of investing. We introduce only one type of investors, since they all share the same hope: They simply want to maximize the profit minimizing the risk. The best utilization of resources occurs at a critical point characterized by the transition between the excess-demand and the excess-supply phases.

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