MARKET DEPTH AND PRICE DYNAMICS: A NOTE

DOI10.1142/S0129183104006455MaRDI QIDQ4832378zbMATH OpenFDO

Authors Frank Westerhoff

Publication date 4 January 2005

Published in International Journal of Modern Physics C (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/cond-mat/0403723

zbMATH Keywords

nonlinearitiesprice dynamicstechnical and fundamental analysisEconophysicsmarket depth

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24)

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.

Recommendations

• A fully consistent, minimal model for nonlinear market impact
• Nonlinear price impact from linear models
• Heterogeneous traders, price-volume signals, and complex asset price dynamics
• MARKET PRICE OF TRADING LIQUIDITY RISK AND MARKET DEPTH
• Nonlinear price impact and portfolio choice

Cites work

• MODELING TERM STRUCTURE DYNAMICS: AN INFINITE DIMENSIONAL APPROACH
• PERCOLATION MODELS OF FINANCIAL MARKET DYNAMICS
• THEORY OF SELF-SIMILAR OSCILLATORY FINITE-TIME SINGULARITIES
• VOLATILITY CLUSTERING IN FINANCIAL MARKETS: A MICROSIMULATION OF INTERACTING AGENTS

Cited in

(5)

• Optimal market thickness
• MARKET PRICE OF TRADING LIQUIDITY RISK AND MARKET DEPTH
• Tobin tax and market depth
• The nonlinear price dynamics of U.S. equity ETFs
• Size matters for OTC market makers: General results and dimensionality reduction techniques

This page was built for publication: MARKET DEPTH AND PRICE DYNAMICS: A NOTE

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4832378)