A stochastic feedback system model of a stock exchange

Author

Gerencsér, László ; Mátyás, Zalán ; Száz, János

Author_Institution

Computer and Automation Institute of the Hungarian Academy of Sciences, MTA SZTAKI, 13-17 Kende u., Budapest 1111, Hungary; gerencser@sztaki.hu

fYear

2005

fDate

12-15 Dec. 2005

Firstpage

5215

Lastpage

5220

Abstract

Stock exchanges are modelled as nonlinear feedback systems where the plant dynamics is defined by known stock market regulations but the actions of agents are unknown. It is assumed though that each agent submits transaction requests according to his/her beliefs on the price dynamics and his/her behavior. The action of the agents may contain a random element, thus we get a non-linear stochastic feedback system. The market is in equilibrium when the actions of the agents reinforce their beliefs on the price dynamics. Assuming that an AR(k) predictor is used for prediction of the price process, a stochastic approximation procedure for finding market equilibrium is described. The proposed procedure is analyzed using the theory of Benveniste, Métivier and Priouret, [1].

Keywords

Automation; Economic forecasting; Feedback; Finite impulse response filter; Nonlinear dynamical systems; Predictive models; Psychology; Stochastic processes; Stochastic systems; Stock markets;

fLanguage

English

Publisher

ieee

Conference_Titel

Decision and Control, 2005 and 2005 European Control Conference. CDC-ECC '05. 44th IEEE Conference on

Print_ISBN

0-7803-9567-0

Type

conf

DOI

10.1109/CDC.2005.1582990

Filename

1582990