Asset price dynamics in a financial market with heterogeneous trading strategies and time delays
Author(s)
Garofalo, Giuseppe
Sansone, Alessandro
Date Issued
2007
Type
Article
Abstract
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian agents who process market information with different time delays. Each class of investors is characterized by path dependent risk aversion. We also allow for the possibility of evolutionary switching between trend following and contrarian strategies. We find that the system shows periodic, quasi-periodic and chaotic dynamics as well as synchronization between technical traders. Furthermore, the model is able to generate time series of returns that exhibit statistical properties similar to those of the S&P 500 index, which is characterized by excess kurtosis, volatility clustering and long memory.
Additional information
L'articolo é disponibile sul sito dell'editore: http://www.sciencedirect.com
Citation
Sansone A., Garofalo G. 2007. Asset price dynamics in a financial market with heterogeneous trading strategies and time delays. "Physica A: Statistical Mechanics and its Applications" 382 (1): 247-257
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