Journal
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volume 391, Issue 3, Pages 715-730Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.physa.2011.08.013
Keywords
Kinetic models; Opinion formation; Stock market; Power laws; Behavioral finance
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In this paper we introduce a simple model for a financial market characterized by a single stock or good and an interplay between two different trader populations, chartists and fundamentalists, which determine the price dynamics of the stock. The model has been inspired by the microscopic Lux-Marchesi model (Lux and Marchesi (2000, 1999) [3,25]). The introduction of kinetic equations permits to study the asymptotic behavior of the investments and the price distributions and to characterize the regimes of lognormal behavior and the formation of power law tails. (C) 2011 Elsevier B.V. All rights reserved.
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