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A prognosis oriented microscopic stock market model

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  • C. Busshaus
  • H. Rieger

Abstract

We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the supply and demand fixing after each round (time step) the new price of the stock according to which the limited buy and sell orders are then executed and new forecasts are made. We show via numerical simulation of this model that the distribution of price differences obeys an exponentially truncated Levy-distribution with a self similarity exponent mu~5.

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  • C. Busshaus & H. Rieger, 1999. "A prognosis oriented microscopic stock market model," Papers cond-mat/9903079, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/9903079
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    Cited by:

    1. LeBaron, Blake, 2001. "Evolution And Time Horizons In An Agent-Based Stock Market," Macroeconomic Dynamics, Cambridge University Press, vol. 5(02), pages 225-254, April.
    2. Rothenstein, R & Pawelzik, K, 2003. "Evolution and anti-evolution in a minimal stock market model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 326(3), pages 534-543.
    3. Hendrik J. Blok, 2000. "On the nature of the stock market: Simulations and experiments," Papers cond-mat/0010211, arXiv.org.

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