Title

Effect of trading momentum and price resistance on stock market dynamics: a Glauber Monte Carlo simulation

Document Type

Article

Publication Date

1-1-2001

Department

Physics and Astronomy

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.x(2) 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, Ply) similar to y(-mu) with mu similar or equal to 4 at e = 1.0, b = 5. The volatility auto-con-elation function (c(tau)) is positive for several iterations. (C) 2001 Elsevier Science B.V. All rights reserved.

Publication Title

PHYSICA A

Volume

289

Issue

1-2

First Page

223

Last Page

228