TY - JOUR
T1 - Long scale evolution of a nonlinear stochastic dynamic system for modeling market price bubbles
AU - Kiselev, S. A.
AU - Phillips, Andy
AU - Gabitov, I.
N1 - Funding Information:
We gratefully acknowledge fruitful discussions with Vladimir Yankov and Kirill Ilinski. This work was supported in part (I.G.) by DOE Contract W-7-405-ENG-36.
PY - 2000/7/17
Y1 - 2000/7/17
N2 - This Letter investigates the stochastic dynamics of a simplified agent-based microscopic model describing stock market evolution. Our mathematical model includes a stochastic market and a sealed-bid double auction. The dynamics of the model are determined by the game of two types of traders: (i) 'intelligent' traders whose strategy is based on nonlinear technical data analysis1 and (ii) 'random' traders that act without a consistent strategy. We demonstrate the effect of time-scale separations on the market dynamics. We study the characteristics of the market relaxation in response to perturbations caused by large cash flows generated between these two groups of traders. We also demonstrate that our model exhibits the formation of a price bubble2 and the subsequent transition to a bear market. (C) 2000 Elsevier Science B.V.
AB - This Letter investigates the stochastic dynamics of a simplified agent-based microscopic model describing stock market evolution. Our mathematical model includes a stochastic market and a sealed-bid double auction. The dynamics of the model are determined by the game of two types of traders: (i) 'intelligent' traders whose strategy is based on nonlinear technical data analysis1 and (ii) 'random' traders that act without a consistent strategy. We demonstrate the effect of time-scale separations on the market dynamics. We study the characteristics of the market relaxation in response to perturbations caused by large cash flows generated between these two groups of traders. We also demonstrate that our model exhibits the formation of a price bubble2 and the subsequent transition to a bear market. (C) 2000 Elsevier Science B.V.
KW - Complex dynamics
KW - Non-equilibrium phenomena
KW - Stochastic processes
KW - Theory and models of chaotic systems
UR - http://www.scopus.com/inward/record.url?scp=0034679401&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0034679401&partnerID=8YFLogxK
U2 - 10.1016/S0375-9601(00)00415-1
DO - 10.1016/S0375-9601(00)00415-1
M3 - Article
AN - SCOPUS:0034679401
VL - 272
SP - 130
EP - 142
JO - Physics Letters, Section A: General, Atomic and Solid State Physics
JF - Physics Letters, Section A: General, Atomic and Solid State Physics
SN - 0375-9601
IS - 1-2
ER -