No abstract

We formulate a microscopic model of the stock market and study the resulting macroscopic phenomena via simulation. In a market of homogeneous investors periodic booms and crashes in stock price are obtained. When there are two t ypes of investors in the market, di ering only in their memory spans, we observe sharp irregular transitions between eras where one population dominates the market to eras where the other population dominates. When the number of investor subgroups is three the market undergoes a dramatic qualitative c hange-it becomes complex. We show that complexity is an intrinsic property of the stock market. This suggests an alternative t o the widely accepted but empirically questionable random walk hypothesis.

No abstract