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Life in the Stockmarket - a Realistic Model for Trading

Author

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  • Fabio Franci

    (Max-Planck-Institut fuer Physik komplexer Systeme Dresden)

  • Lorenzo Matassini

    (Max-Planck-Institut fuer Physik komplexer Systeme Dresden)

Abstract

We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated volatility arise as a consequence of the collective behavior of agents: With their interaction they determine a price which in turn affects their future way of investing. We introduce only one type of investors, since they all share the same hope: They simply want to maximize the profit minimizing the risk. The best utilization of resources occurs at a critical point characterized by the transition between the excess-demand and the excess-supply phases.

Suggested Citation

  • Fabio Franci & Lorenzo Matassini, 2000. "Life in the Stockmarket - a Realistic Model for Trading," Papers cond-mat/0008466, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0008466
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    Cited by:

    1. Matassini, Lorenzo & Franci, Fabio, 2001. "On financial markets trading," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 289(3), pages 526-542.

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