Market depth and price dynamics: A note
Other Condensed Matter
2009-11-10 v1 Trading and Market Microstructure
Abstract
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.
Keywords
Cite
@article{arxiv.cond-mat/0403723,
title = {Market depth and price dynamics: A note},
author = {Frank Westerhoff},
journal= {arXiv preprint arXiv:cond-mat/0403723},
year = {2009}
}
Comments
9 pages from economist, including 4 figs, for Int. J. Mod. Phys. C 15, issue 7