Effect of Trading Momentum and Price Resistance on Stock Market Dynamics: A Glauber Monte Carlo Simulation
Physics and Astronomy
Mathematics and Natural Sciences
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 Ee=e·x2 resulting from the price deviation x from an initial value and the momentum trading by the potential energy Ep=−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.
Physica A: Statistical Mechanics and its Applications
Pandey, R. B.,
(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