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Market Force, Ecology, and Evolution

Abstract:

In financial markets, an excess of buying tends to drive prices up, and an excess of selling tends to drive them down. This is called market impact. Based on a simplified model for market making, it is possible to derive a unique functional form for market impact. This can be used to formulate a non-equilibrium theory for price formation. Commonly used trading strategies, such as value investing, and trend following induce characteristic dynamics in the price. Although there is a tenden...

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Institution:
University of Oxford
Department:
Oxford, MPLS, Mathematical Inst
URN:
uuid:98f268e7-cfd3-4597-a39c-c38963f06503
Source identifiers:
387698
Local pid:
pubs:387698

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