The Grounds For Time Dependent Market Potentials From Dealers' Dynamics

Details The Grounds For Time Dependent Market Potentials From Dealers' Dynamics The Grounds For Time Dependent Market Potentials From Dealers' Dynamics

2007-10-09

arxiv.org/abs/0710.1729v1

Economy

Quantitative Finance

General Finance

9 pages, 3 figures, proceedings of APFA6

Scientific paper

10.1140/epjb/e2008-00155-4

We apply the potential force estimation method to artificial time series of market price produced by a deterministic dealer model. We find that dealers' feedback of linear prediction of market price based on the latest mean price changes plays the central role in the market's potential force. When markets are dominated by dealers with positive feedback the resulting potential force is repulsive, while the effect of negative feedback enhances the attractive potential force.

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