Stock price fluctuations and the mimetic behaviors of traders

Details Stock price fluctuations and the mimetic behaviors of traders Stock price fluctuations and the mimetic behaviors of traders

2006-07-23

arxiv.org/abs/physics/0607202v2

Physics

Computational Physics

7 pages, 8 figures

Scientific paper

10.1016/j.physa.2007.02.017

We give a stochastic microscopic modelling of stock markets driven by continuous double auction. If we take into account the mimetic behavior of traders, when they place limit order, our virtual markets shows the power-law tail of the distribution of returns with the exponent outside the Levy stable region, the short memory of returns and the long memory of volatilities. The Hurst exponent of our model is asymptotically 1/2. An explanation is also given for the profile of the autocorrelation function, which is responsible for the value of the Hurst exponent.

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