Effect of trading momentum and price resistance on stock market dynamics: a Glauber Monte Carlo simulation
Physics and Astronomy
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.
Pandey, R. B.,
(2001). Effect of trading momentum and price resistance on stock market dynamics: a Glauber Monte Carlo simulation. PHYSICA A, 289(1-2), 223-228.
Available at: http://aquila.usm.edu/fac_pubs/4007