Related papers: Market force, ecology and evolution
We propose a non-linear observation-driven version of the Hasbrouck (1991) model for dynamically estimating trades' market impact and information content. We find that market impact displays an intraday pattern superimposed with large…
The methodology presented provides a quantitative way to characterize investor behavior and price dynamics within a particular asset class and time period. The methodology is applied to a data set consisting of over 250,000 data points of…
The Efficient Market Hypothesis has been a staple of economics research for decades. In particular, weak-form market efficiency -- the notion that past prices cannot predict future performance -- is strongly supported by econometric…
Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance,…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
We develop an empirical behavioural order-driven (EBOD) model, which consists of an order placement process and an order cancellation process. Price limit rules are introduced in the definition of relative price. The order placement process…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
Given the combined evidences of bounded rationality, limited information and short-term optimization, over-the-counter (OTC) fresh product markets provide a perfect instance where to develop a behavioural approach to the analysis of…
Opinions and beliefs determine the evolution of social systems. This is of particular interest in finance, as the increasing complexity of financial systems is coupled with information overload. Opinion formation, therefore, is not always…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
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…
In this paper mechanisms of reversion - momentum transition are considered. Two basic nonlinear mechanisms are highlighted: a slow and fast bifurcation. A slow bifurcation leads to the equilibrium evolution, preceded by stability loss delay…
We reverse-engineer the equilibrium construction process of asset prices in order to obtain returns which depend on firm characteristics, possibly in a linear fashion. One key requirement is that agents must have demands that rely…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
Studies looking at electricity market designs for very high shares of wind and solar often conclude that the energy-only market will break down. Without fuel costs, it is said that there is nothing to set prices. Symptoms of breakdown…
The phenomenology of the forward rate curve (FRC) can be accurately understood by the fluctuations of a stiff elastic string (Le Coz and Bouchaud, 2024). By relating the exogenous shocks driving such fluctuations to the surprises in the…