Stock price fluctuations and the mimetic behaviors of traders

Abstract

We give a stochastic microscopic modelling of stock markets driven by continuous double auction. If we take into account the mimetic behavior of traders, when they place limit order, our virtual markets shows the power-law tail of the distribution of returns with the exponent outside the Levy stable region, the short memory of returns and the long memory of volatilities. The Hurst exponent of our model is asymptotically 1/2. An explanation is also given for the profile of the autocorrelation function, which is responsible for the value of the Hurst exponent.

7 pages, 8 figures

References in corpus (8)

• Emergence of scaling in random networks
• Statistical mechanics of complex networks
• The statistical properties of the volatility of price fluctuations
• Inverse Cubic Law for the Probability Distribution of Stock Price Variations
• Scaling of the distribution of price fluctuations of individual companies
• Statistical theory of the continuous double auction
• Simple model of a limit order-driven market
• Mean-field approximation for a limit order driven market model

Cited by in corpus (5)

• Solvable Stochastic Dealer Models for Financial Markets
• A comparison among some Hurst exponent approaches to predict nascent bubbles in $500$ company stocks
• Correlation of coming limit price with order book in stock markets
• Simple Stochastic Order-Book Model of Swarm Behavior in Continuous Double Auction
• On possible origins of trends in financial market price changes