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A random dynamical system model of a stylized equity market

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  • Hatjispyros, S.J.
  • Yannacopoulos, A.N.

Abstract

We propose a random dynamical systems model for a stylized equity market. The model generalises previous deterministic models for price formation in equity markets. We provide analytic results (existence of fixed points, existence of invariant measures) as well as numerical results indicating the dynamical richness of this simple model. The model can be used to assess the effects of uncertainty on the fundamentals on stock price dynamics.

Suggested Citation

  • Hatjispyros, S.J. & Yannacopoulos, A.N., 2005. "A random dynamical system model of a stylized equity market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 347(C), pages 583-612.
    • Handle: RePEc:eee:phsmap:v:347:y:2005:i:c:p:583-612
    DOI: 10.1016/j.physa.2004.09.036
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    References listed on IDEAS

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    1. Day, Richard H. & Huang, Weihong, 1990. "Bulls, bears and market sheep," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 299-329, December.
    2. Black, Fischer, 1986. "Noise," Journal of Finance, American Finance Association, vol. 41(3), pages 529-543, July.
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    Cited by:

    1. Hatjispyros, Spyridon J. & Nicoleris, Theodoros & Walker, Stephen G., 2011. "Dependent mixtures of Dirichlet processes," Computational Statistics & Data Analysis, Elsevier, vol. 55(6), pages 2011-2025, June.
    2. Hatjispyros, S.J. & Nicoleris, Theodoros & Walker, Stephen G., 2007. "Parameter estimation for random dynamical systems using slice sampling," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 381(C), pages 71-81.
    3. Hatjispyros, Spyridon J. & Nicoleris, Theodoros & Walker, Stephen G., 2009. "A Bayesian nonparametric study of a dynamic nonlinear model," Computational Statistics & Data Analysis, Elsevier, vol. 53(12), pages 3948-3956, October.

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