Fundamentalists clashing over the book: a study of order-driven stock markets

Authored by M LiCalzi, P Pellizzari

Date Published: 2003-12

DOI: 10.1088/1469-7688/3/6/306

Sponsors: No sponsors listed

Platforms: R

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

Agent-based models of market dynamics must strike a compromise between the structural assumptions that represent the trading mechanism and the behavioural assumptions that describe the rules by which traders make their decisions. We present a structurally detailed model of an order-driven stock market and show that a minimal set of behavioural assumptions suffices to generate a leptokurtic distribution of short-term log-returns. This result supports the conjecture that the emergence of some statistical properties of financial time series is due to the microstructure of stock markets.

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