Evolutionary Model of Stock Markets
Abstract
The paper presents an evolutionary economic model for the price evolution of stocks. Treating a stock market as a self-organized system governed by a fast purchase process and slow variations of demand and supply the model suggests that the short term price distribution has the form a logistic (Laplace) distribution. The long term return can be described by Laplace-Gaussian mixture distributions. The long term mean price evolution is governed by a Walrus equation, which can be transformed into a replicator equation. This allows quantifying the evolutionary price competition between stocks. The theory suggests that stock prices scaled by the price over all stocks can be used to investigate long-term trends in a Fisher-Pry plot. The price competition that follows from the model is illustrated by examining the empirical long-term price trends of two stocks.
Cite
@article{arxiv.1607.01248,
title = {Evolutionary Model of Stock Markets},
author = {Joachim Kaldasch},
journal= {arXiv preprint arXiv:1607.01248},
year = {2016}
}