Effect of trading momentum and price resistance on stock market dynamics: a Glauber Monte Carlo simulation
Abstract
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 powerlaw, P( y)∼ y^{ μ} with μ≃4 at e=1.0, b=5 . The volatility autocorrelation function ( c( τ)) is positive for several iterations.
 Publication:

Physica A Statistical Mechanics and its Applications
 Pub Date:
 January 2001
 DOI:
 10.1016/S03784371(00)004969
 Bibcode:
 2001PhyA..289..223C