# 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} }

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…

## 74 Citations

Asset price dynamics for a two-asset market system.

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A mathematical model for a market involving two stocks which are traded within a single homogeneous group of investors who have similar motivations and strategies for trading proves that all equilibria are stable in the absence of a clear emphasis on a trend-based value for each stock.

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We analyze the relative price change of assets starting from basic supply/demand considerations. The resulting stochastic differential equation has coefficients that are functions of supply and…

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Abstract The complex interaction between the volatility and the price trend is examined. We model stochastic asset prices using the asset flow model with randomness arising directly from supply and…

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- 2018

This paper shows that strategies with constant trading rates, which represent the well-known constant-rebalanced portfolio (CRP) strategies, are optimal in the sense that they minimize investment risks, and that investors pursuing non-CRP strategies are at risk of loss of wealth.

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- EconomicsPhysica A: Statistical Mechanics and its Applications
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Laboratory asset markets provide an experimental setting in which to observe investor behavior. Over more than a decade, numerous studies have found that participants in laboratory experiments…

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