dorsal/arxiv
View SchemaAsset Price Dynamics in a Financial Market with Heterogeneous Trading Strategies and Time Delays
| Authors | Giuseppe Garofalo, Alessandro Sansone |
|---|---|
| Categories | |
| ArXiv ID | physics/0607276 |
| URL | https://arxiv.org/abs/physics/0607276 |
Abstract
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian agents who process information from the market with different time delays. Each class of investor is characterized by path dependent risk aversion. We also allow for the possibility of evolutionary switching between trend following and contrarian strategies. We find that the system shows periodic, quasi-periodic and chaotic dynamics as well as synchronization between technical traders. Furthermore, the model is able to generate time series of returns that exhibit statistical properties similar to those of the S&P500 index, which is characterized by excess kurtosis, volatility clustering and long memory
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"abstract": "In this paper we present a continuous time dynamical model of heterogeneous\nagents interacting in a financial market where transactions are cleared by a\nmarket maker. The market is composed of fundamentalist, trend following and\ncontrarian agents who process information from the market with different time\ndelays. Each class of investor is characterized by path dependent risk\naversion. We also allow for the possibility of evolutionary switching between\ntrend following and contrarian strategies. We find that the system shows\nperiodic, quasi-periodic and chaotic dynamics as well as synchronization\nbetween technical traders. Furthermore, the model is able to generate time\nseries of returns that exhibit statistical properties similar to those of the\nS\u0026P500 index, which is characterized by excess kurtosis, volatility clustering\nand long memory",
"arxiv_id": "physics/0607276",
"authors": [
"Giuseppe Garofalo",
"Alessandro Sansone"
],
"categories": [
"physics.data-an",
"q-fin.PR"
],
"title": "Asset Price Dynamics in a Financial Market with Heterogeneous Trading Strategies and Time Delays",
"url": "https://arxiv.org/abs/physics/0607276"
},
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