Stock market as a dynamic game with continuum of players

This paper contains a game-theoretic model describing the behaviour of investors at a stock exchange. The model presented is developed to reect the actual market microstructure. The players constitute a non-uniform continuum, differing, among others, by the planning horizon, the external ow of money which can be invested, formation of expectations about future prices, which, briey, divides the investors into the following groups: fundamental analysts, chartist, users of various econometric models, users of Capital Asset Pricing Model, and players observing a random exogenous signal. Prices are determined by orders and the equilibrating mechanism of the stock exchange. The mechanism presented is the actual single-price auction system used, among others, at Warsaw Stock Exchange. One of the main issues are self-verifying beliefs. Results of numerical simulations of stock exchange based on the model are also included.