Trader Behavior and its Effect on Asset Price Dynamics

In this paper, we present a natural mathematical framework to model trader behavior as a continuous time discrete event process, and derive stochastic differential equations for aggregate behavior and price dynamics by passing to diffusion limits. In particular, we model extraneous, value, momentum and hedge traders. Through analysis and numerical simulation we explore some of the effects these trading strategies have on price dynamics.

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Year of publication:	2009
Authors:	Primbs, James ; Rathinam, Muruhan
Published in:	Applied Mathematical Finance. - Taylor & Francis Journals, ISSN 1350-486X. - Vol. 16.2009, 2, p. 151-181
Publisher:	Taylor & Francis Journals
Subject:	Trader behavior \| price dynamics \| stock pinning \| diffusion limit \| Poisson random measure

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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