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Micro-Simulations of Financial Markets and the Stylized Facts

  • Thomas Lux
  • Florian Heitger
Conference paper

Abstract

In the last couple of years, microscopic simulations of financial markets have been undertaken by a number of groups from both economics and physics [1],[2],[3],[4]. While Monte Carlo simulations as a technical tool have been used for a long time in the economics/finance literature, the new generation of models has a particular focus: they try to provide possible explanations of hitherto mysterious statistical findings like the fat tails and clustered volatility of financial returns. While this interpretation of the stylized facts as emergent properties of a complex decentralized multi-component system appears new (and sometimes surprising) for economists, it seems rather natural from the perspective of “scaling theory” in statistical physics. In this paper, we discuss and illustrate this approach focusing on the structure and results of the “prototype” model presented in [5][6].

Keywords

Financial Market Stylize Fact Stochastic Volatility Financial Time Series Efficient Market Hypothesis 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Japan 2002

Authors and Affiliations

  • Thomas Lux
    • 1
  • Florian Heitger
    • 1
  1. 1.Department of EconomicsUniversity of KielKielGermany

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