FLUCTUATIONS AND MARKET FRICTION IN FINANCIAL TRADING
/ Authors
/ Abstract
We study the relation between stock price changes and the difference in the volume of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation–dissipation theorem in physical systems. We empirically investigate fluctuations and market friction for a major US stock and find support for our model calculations.
Journal: International Journal of Modern Physics C