The complex dynamics of a simple stock market model

Moshe Levy, Nathan Persky, Sorin Solomon

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


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 types of investors in the market, differing only in their memory spans, we observe sharp irregular transitions between eras where one population dominates the market and eras where the other population dominates. When the number of investor subgroups is three the market undergoes a dramatic qualitative change - it becomes complex. We show that complexity is an intrinsic property of the stock market. This suggests an alternative to the widely accepted but empirically questionable random walk hypothesis.

Original languageAmerican English
Pages (from-to)93-113
Number of pages21
JournalInternational Journal of High Speed Computing
Issue number1
StatePublished - Mar 1996


  • Complexity
  • Efficient market hypothesis
  • Simulation
  • Stock market


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