Asset flow and momentum: deterministic and stochastic equations

@article{Caginalp1999AssetFA,
title={Asset flow and momentum: deterministic and stochastic equations},
author={Gunduz Caginalp and D. Balenovich},
journal={Philosophical Transactions of the Royal Society of London. Series A: Mathematical, Physical and Engineering Sciences},
year={1999},
volume={357},
pages={2119 - 2133}
}
• Published 1 August 1999
• Mathematics
• Philosophical Transactions of the Royal Society of London. Series A: Mathematical, Physical and Engineering Sciences
We use basic conservation and microeconomic identities to derive a nonlinear first-order ordinary differential equation for a market system with a prescribed number of shares and cash supply (including additions in time). The equation incorporates the ideas of the finiteness of assets and preference influenced by price momentum and discount from fundamental value. The concept of a ‘liquidity value’, defined as the total cash in the system divided by the number of shares, emerges as a key price…
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