Effect of Trading Momentum and Price Resistance on Stock Market Dynamics: A Glauber Monte Carlo Simulation

Authors

F. Castiglione, Cologne University
Ras B. Pandey, University of Southern MississippiFollow
D. Stauffer, Cologne UniversityFollow

Document Type

Article

Publication Date

1-1-2001

Department

Physics and Astronomy

School

Mathematics and Natural Sciences

Abstract

A Monte Carlo computer simulation model is presented to study the evolution of stock price and the distribution of price fluctuation. The resistance is described by an elastic energy E_e=e·x² resulting from the price deviation x from an initial value and the momentum trading by the potential energy E_p=−b·y in a price gradient y field. The distribution of price fluctuation (P(y)) is symmetric and shows a long time tail compatible over some range with a power-law, P(y)∼y^−μ with μ≃4 at e = 1.0, b = 5. The volatility auto-correlation function (c(τ)) is positive for several iterations.

Publication Title

Physica A: Statistical Mechanics and its Applications

Volume

289

Issue

1-2

First Page

223

Last Page

228

Recommended Citation

Castiglione, F., Pandey, R. B., Stauffer, D. (2001). Effect of Trading Momentum and Price Resistance on Stock Market Dynamics: A Glauber Monte Carlo Simulation. Physica A: Statistical Mechanics and its Applications, 289(1-2), 223-228.
Available at: https://aquila.usm.edu/fac_pubs/4007