Related papers: Quantifying Stock Price Response to Demand Fluctua…
We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…
We study the relation between stock price changes and the difference in the number of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation-dissipation theorem…
Records of the traded value f_i(t) of stocks display fluctuation scaling, a proportionality between the standard deviation sigma(i) and the average <f(i)>: sigma(i) ~ f(i)^alpha, with a strong time scale dependence alpha(dt). The…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
Scale-free distributions and correlation functions found in financial data are reminiscent of the scale invariance of physical observables in the vicinity of a critical point. Here, we present empirical evidence for a transition phenomenon,…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
We introduce a microscopic model for the dynamics of the order book to study how the lack of liquidity influences price fluctuations. We use the average density of the stored orders (granularity $g$) as a proxy for liquidity. This leads to…
We study in this paper the time evolution of stock markets using a statistical physics approach. Each agent is represented by a spin having a number of discrete states $q$ or continuous states, describing the tendency of the agent for…
This paper describes asset price and return disturbances as result of relations between transactions and multiple kinds of expectations. We show that disturbances of expectations can cause fluctuations of trade volume, price and return. We…
We carry out a detailed large-scale data analysis of price response functions in the spot foreign exchange market for different years and different time scales. Such response functions provide quantitative information on the deviation from…
Previous studies of the stock price response to individual trades focused on single stocks. We empirically investigate the price response of one stock to the trades of other stocks. How large is the impact of one stock on others and vice…
We develop a theory of bid and ask price dynamics where the two prices form due to interaction of buy and sell orders. In this model the two prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask"…
Recent research on the response of stock prices to trading activity revealed long lasting effects, even across stocks of different companies. These results imply non-Markovian effects in price formation and when trading many stocks at the…
We observe the effects of the three different events that cause spread changes in the order book, namely trades, deletions and placement of limit orders. By looking at the frequencies of the relative amounts of price changing events, we…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
By applying the multifractal detrended fluctuation analysis to the high-frequency tick-by-tick data from Deutsche B\"orse both in the price and in the time domains, we investigate multifractal properties of the time series of logarithmic…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Complex systems comprise a large number of interacting elements, whose dynamics is not always a priori known. In these cases -- in order to uncover their key features -- we have to turn to empirical methods, one of which was recently…