How Markets Slowly Digest Changes in Supply and Demand
- J. Bouchaud, J. Farmer, F. Lillo
- Economics
- 4 September 2008
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how…
The economy needs agent-based modelling
The leaders of the world are flying the economy by the seat of their pants, say J. Doyne Farmer and Duncan Foley. There is, however, a better way to help guide financial policies.
The Long Memory of the Efficient Market
For the London Stock Exchange we demonstrate that the signs of orders obey a long-memory process. The autocorrelation function decays roughly as a power law with an exponent of 0.6, corresponding to…
Market Force, Ecology, and Evolution
- J. Farmer
- Economics
- 1 December 1998
In financial markets, an excess of buying tends to drive prices up, and an excess of selling tends to drive them down. This is called market impact. Based on a simplified model for market making, it…
The Predictive Power of Zero Intelligence in Financial Markets
- J. Farmer, P. Patelli, Ilija I. Zovko
- EconomicsProceedings of the National Academy of Sciences…
- 9 September 2003
This work uses data from the London Stock Exchange to test a simple model in which minimally intelligent agents place orders to trade at random and demonstrates the existence of simple laws relating prices to order flows and suggests there are circumstances where the strategic behavior of agents may be dominated by other considerations.
Stability Analysis of Financial Contagion Due to Overlapping Portfolios
- F. Caccioli, Munik Shrestha, C. Moore, J. Farmer
- EconomicsArXiv
- 22 October 2012
A network approach to the amplification of financial contagion due to the combination of overlapping portfolios and leverage is developed, and it is shown how it can be understood in terms of a generalized branching process.
An Empirical Behavioral Model of Liquidity and Volatility
- Szabolcs Mike, J. Farmer
- Economics
- 3 September 2007
Econophysics: Master curve for price-impact function
- F. Lillo, J. Farmer, R. Mantegna
- EconomicsNature
- 9 January 2003
This single-curve collapse of the price-impact function suggests that fluctuations from the supply-and-demand equilibrium for many financial assets, differing in economic sectors of activity and market capitalization, are governed by the same statistical rule.
Statistical theory of the continuous double auction
- Eric Smith, J. Farmer, L. Gillemot, S. Krishnamurthy
- Economics
- 21 October 2002
Abstract Most modern financial markets use a continuous double auction mechanism to store and match orders and facilitate trading. In this paper we develop a microscopic dynamical statistical model…
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