Physics – Physics and Society
Scientific paper
2005-10-28
Physics
Physics and Society
4 pages, 3 figures. This is quite possibly the final version. To appear in J. Phys A
Scientific paper
10.1088/0305-4470/39/48/001
Starting from an exact relationship between news, threshold and price return distributions in the stationary state, I discuss the ability of the Ghoulmie-Cont-Nadal model of traders to produce fat-tailed price returns. Under normal conditions, this model is not able to transform Gaussian news into fat-tailed price returns. When the variance of the news so small that only the players with zero threshold can possibly react to news, this model produces Levy-distributed price returns with a -1 exponent. In the special case of super-linear price impact functions, fat-tailed returns are obtained from well-behaved news.
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