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Modeling interactions of trading volumes in financial dynamics |
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| Authors: | F. Ren B. Zheng |
| Affiliation: | a School of Business, East China University of Science and Technology, Shanghai 200237, China b Zhejiang Institute of Modern Physics, Zhejiang University, Hangzhou 310027, China c Research Center for Econophysics, East China University of Science and Technology, Shanghai 200237, China |
| Abstract: | A dynamic herding model with interactions of trading volumes is introduced. At time t, an agent trades with a probability, which depends on the ratio of the total trading volume at time t−1 to its own trading volume at its last trade. The price return is determined by the volume imbalance and number of trades. The model can reproduce the power-law distributions of the trading volume, number of trades and price return, and the probable relation between them. The exponents are tunable by adjusting the values of the parameters, but show slight deviation from those revealed in empirical studies. Moreover, the time series generated are long-range correlated. We demonstrate that the results are rather robust, and do not depend on the particular form of the trading probability. |
| Keywords: | Econophysics Trading volume Scaling Complex systems |
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