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Price Formation Based On Particle-Cluster Aggregation

Author

Listed:
  • SHIJUN WANG

    (Laboratory of Intelligent Technology and Systems, Department of Automation, Tsinghua University, Beijing 100084, China)

  • CHANGSHUI ZHANG

    (Laboratory of Intelligent Technology and Systems, Department of Automation, Tsinghua University, Beijing 100084, China)

Abstract

In the present work, we propose a microscopic model of financial markets based on particle-cluster aggregation on a two-dimensional small-world information network in order to simulate the dynamics of the stock markets. "Stylized facts" of the financial market time series, such as fat-tail distribution of returns, volatility clustering and multifractality, are observed in the model. The results of the model agree with empirical data taken from historical records of the daily closures of the NYSE composite index.

Suggested Citation

  • Shijun Wang & Changshui Zhang, 2005. "Price Formation Based On Particle-Cluster Aggregation," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 16(11), pages 1803-1810.
    • Handle: RePEc:wsi:ijmpcx:v:16:y:2005:i:11:n:s012918310500831x
    DOI: 10.1142/S012918310500831X
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    References listed on IDEAS

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    1. Mantegna,Rosario N. & Stanley,H. Eugene, 2007. "Introduction to Econophysics," Cambridge Books, Cambridge University Press, number 9780521039871, September.
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