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How Markets Slowly Digest Changes in Supply and Demand
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 howExpand
The price dynamics of common trading strategies
A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses aExpand
Market Force, Ecology, and Evolution
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, itExpand
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 toExpand
Statistical theory of the continuous double auction
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 modelExpand
The predictive power of zero intelligence in financial markets.
TLDR
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. Expand
Econophysics: Master curve for price-impact function
TLDR
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. Expand
An Empirical Behavioral Model of Liquidity and Volatility
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model inExpand
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 Power of Patience: A Behavioral Regularity in Limit Order Placement
In this paper we demonstrate a striking regularity in the way people place limit orders in financial markets, using a data set consisting of roughly two million orders from the London Stock Exchange.Expand
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