Physics – Condensed Matter – Statistical Mechanics
Scientific paper
2000-05-24
Physics
Condensed Matter
Statistical Mechanics
also available at: http://shum.cc.huji.ac.il/~sorin/aix/aixfig.tar.gz. Proceedings of Complex behavior in economics: Aix en
Scientific paper
The LLS stock market model is a model of heterogeneous quasi-rational investors operating in a complex environment about which they have incomplete information. We review the main features of this model and several of its extensions. We study the effects of investor heterogeneity and show that predation, competition, or symbiosis may occur between different investor populations. The dynamics of the LLS model lead to the empirically observed Pareto wealth distribution. Many properties observed in actual markets appear as natural consequences of the LLS dynamics: truncated Levy distribution of short-term returns, excess volatility, a return autocorrelation "U-shape" pattern, and a positive correlation between volume and absolute returns.
Levy Moshe
Solomon Sorin
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