Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099165 | Journal of Economic Dynamics and Control | 2009 | 15 Pages |
Abstract
This paper studies the role of the order book market mechanism in shaping price movements and the order flow in a zero-intelligence agent model of a dynamic limit-order market. The results indicate that many stylised facts of limit-order markets are not dependent on individual strategic behaviour; they can be obtained from the interaction of the market mechanism and non-strategic agents. Positive correlation in order types, the shape of the order book and short term price predictability, for instance, do not require strategic considerations by individual traders. In contrast the absolute probabilities of order submission highlight the contribution of strategic behaviour to market dynamics.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Dan Ladley, Klaus Reiner Schenk-Hoppé,