A Prototype Model of Stock Exchange

TL;DR

This paper introduces a prototype model of a stock exchange where traders interact autonomously, generating realistic price fluctuations that mirror real market statistics, providing insights into self-organized market dynamics.

Contribution

A novel self-organized stock market model demonstrating realistic price behaviors through trader interactions without external influences.

Findings

Generated price histories resemble real market data

Statistical properties align with empirical market observations

Model offers a new framework for studying market self-organization

Abstract

A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate his assets by speculating on the price's fluctuations which are produced by themselves. The model reproduced rather realistic price histories whose statistical properties are also similar to those observed in real markets.