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Effect of trading momentum and price resistance on stock market dynamics: a Glauber Monte Carlo simulation

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  • Castiglione, F
  • Pandey, R.B
  • Stauffer, D

Abstract

A Monte Carlo computer simulation model is presented to study the evolution of stock price and the distribution of price fluctuation. The resistance is described by an elastic energy Ee=e·x2 resulting from the price deviation x from an initial value and the momentum trading by the potential energy Ep=−b·y in a price gradient y field. The distribution of price fluctuation (P(y)) is symmetric and shows a long time tail compatible over some range with a power-law, P(y)∼y−μ with μ≃4 at e=1.0,b=5. The volatility auto-correlation function (c(τ)) is positive for several iterations.

Suggested Citation

  • Castiglione, F & Pandey, R.B & Stauffer, D, 2001. "Effect of trading momentum and price resistance on stock market dynamics: a Glauber Monte Carlo simulation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 289(1), pages 223-228.
    • Handle: RePEc:eee:phsmap:v:289:y:2001:i:1:p:223-228
    DOI: 10.1016/S0378-4371(00)00496-9
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    References listed on IDEAS

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    1. Levy, Haim & Levy, Moshe & Solomon, Sorin, 2000. "Microscopic Simulation of Financial Markets," Elsevier Monographs, Elsevier, edition 1, number 9780124458901.
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    Cited by:

    1. Groot, Robert D., 2005. "Lévy distribution and long correlation times in supermarket sales," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 353(C), pages 501-514.
    2. R. D. Groot, 2004. "Levy distribution and long correlation times in supermarket sales," Papers cond-mat/0412163, arXiv.org.

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