Market depth and price dynamics: A note

Autor(en): Westerhoff, FH
Stichwörter: Computer Science; Computer Science, Interdisciplinary Applications; econophysics; FLUCTUATIONS; market depth; nonlinearities; Physics; Physics, Mathematical; price dynamics; technical and fundamental analysis
Erscheinungsdatum: 2004
Herausgeber: WORLD SCIENTIFIC PUBL CO PTE LTD
Journal: INTERNATIONAL JOURNAL OF MODERN PHYSICS C
Volumen: 15
Ausgabe: 7
Startseite: 1005
Seitenende: 1012
Zusammenfassung: 
This note explores the consequences of nonlinear price impact functions on price dynamics within the chartist-fundamentalist framework. Price impact functions may be nonlinear with respect to trading volume. As indicated by recent empirical studies, a given transaction may cause a large (small) price change if market depth is low (high). Simulations reveal that such a relationship may create endogenous complex price fluctuations even if the trading behavior of chartists and fundamentalists is linear.
ISSN: 01291831
DOI: 10.1142/S0129183104006455

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