COMPLEX DYNAMICS IN A SIMPLE STOCK MARKET MODEL

Abstract

A deterministic model is introduced in terms of conservation principles to describe the (qualitative) price dynamics of a stock market. It is shown how the fundamentalist and chartist patterns of the trader behavior affect the price dynamics. The model can display complex oscillatory behavior with transient erratic oscillations, which resembles the behavior found in actual price dynamics. By means of numerical simulations, it is shown that the model can produce price time-series with statistics similar to that found in real financial data.