Eur. Phys. J. B 39, 409-413 (2004)
https://doi.org/10.1140/epjb/e2004-00206-x

Market dynamics and stock price volatility

¹ Department of Systems Science, School of Management, Beijing Normal University, Beijing, 100875, P.R. China
² Program in Economics MSC 0204, James Madison University, Harrisonburg, VA22807, USA

Corresponding author: ^a hli@bnu.edu.cn

Received: 20 October 2003
Revised: 21 January 2004
Published online: 12 July 2004

Abstract

This paper presents a possible explanation for some of the empirical properties of asset returns within a heterogeneous-agents framework. The model turns out, even if we assume the input fundamental value follows an simple Gaussian distribution lacking both fat tails and volatility dependence, these features can show up in the time series of asset returns. In this model, the profit comparison and switching between heterogeneous play key roles, which build a connection between endogenous market and the emergence of stylized facts.