Journal article

Trading model with pair pattern strategies

  • Ren, F. School of Business, East China University of Science and Technology, Shanghai, China - Research Center for Econophysics, East China University of Science and Technology, Shanghai, China
  • Zhang, Yi-Cheng Departement de Physique, Université de Fribourg, Switzerland - Physics Department, Renmin University, Beijing, China
    24.06.2008
Published in:
  • Physica A: Statistical Mechanics and its Applications. - 2008, vol. 387, no. 22, p. 5523-5534
English A simple trading model based on pair pattern strategy space with holding periods is proposed. Power-law behavior is observed for the return variance σ², the price impact H and the predictability K for both models, with linear and square root impact functions. The sum of the traders’ wealth displays a positive value for the model with a square root price impact function, and a qualitative explanation is given based on the observation of the conditional excess demand 〈A|u〉. The cumulative wealth distribution also obeys a power-law behavior with an exponent close to that of real markets. An evolutionary trading model is further proposed. The elimination mechanism effectively changes the behavior of traders, and a power-law behavior is observed in the measure of zero return distribution P(r=0). The trading model with other types of traders, e.g., traders with the MG’s strategies and producers, are also carefully studied.
Faculty
Faculté des sciences et de médecine
Department
Département de Physique
Language
  • English
Classification
Physics
License
License undefined
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/301301
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