Greed, fear and stock market dynamics

Autor(en): Westerhoff, FH
Stichwörter: chaos; econophysics; greed and fear; MODEL; Physics; Physics, Multidisciplinary; stock market dynamics; stylized facts; TOBIN TAX
Erscheinungsdatum: 2004
Herausgeber: ELSEVIER SCIENCE BV
Journal: PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volumen: 343
Startseite: 635
Seitenende: 642
Zusammenfassung: 
We present a behavioral stock market model in which traders are driven by greed and fear. In general, the agents optimistically believe in rising markets and thus buy stocks. But if stock prices change too abruptly, they panic and sell stocks. Our model mimics some stylized facts of stock market dynamics: (1) stock prices increase over time, (2) stock markets sometimes crash, (3) stock prices show little pair correlation between successive daily changes, and (4) periods of low volatility alternate with periods of high volatility. A strong feature of the model is that stock prices completely evolve according to a deterministic low-dimensional nonlinear law of motion. (C) 2004 Elsevier B.V. All rights reserved.
ISSN: 03784371
DOI: 10.1016/j.physa.2004.06.059

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