Kinetic models for socio-economic dynamics of speculative markets

Dario Maldarella, Lorenzo Pareschi

Research output: Contribution to journalArticlepeer-review

54 Scopus citations

Abstract

In this paper we introduce a simple model for a financial market characterized by a single stock or good and an interplay between two different trader populations, chartists and fundamentalists, which determine the price dynamics of the stock. The model has been inspired by the microscopic LuxMarchesi model (Lux and Marchesi (2000, 1999) [3,25]). The introduction of kinetic equations permits to study the asymptotic behavior of the investments and the price distributions and to characterize the regimes of lognormal behavior and the formation of power law tails.

Original languageEnglish
Pages (from-to)715-730
Number of pages16
JournalPhysica A: Statistical Mechanics and its Applications
Volume391
Issue number3
DOIs
StatePublished - 1 Feb 2012
Externally publishedYes

Keywords

  • Behavioral finance
  • Kinetic models
  • Opinion formation
  • Power laws
  • Stock market

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