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research article
Modelling price pressure in financial markets
We present experimental evidence that, unlike traditional assumptions in economic theory, security prices do not respond to pressure from their own excess demand. Instead, prices respond to excess demand of all securities, despite the absence of a direct link between markets. We propose a model of price pressure that explains these findings. In our model, agents set order prices that reflect the marginal valuation of desired future holdings, called "aspiration levels."
Type
research article
Web of Science ID
WOS:000271110900009
Authors
Publication date
2009
Published in
Volume
72
Start page
119
End page
130
Peer reviewed
REVIEWED
Written at
EPFL
EPFL units
Available on Infoscience
November 30, 2010
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