Related Experiment Video
Updated: Jul 15, 2026

Studying Cell Rolling Trajectories on Asymmetric Receptor Patterns
Published on: February 13, 2011
Understanding the complex dynamics of stock markets through cellular automata
G Qiu1, D Kandhai, P M A Sloot
1Section Computational Science, Faculty of Science, University of Amsterdam, Kruislaan 403, 1098 SJ Amsterdam, The Netherlands.
Abstract:
We present a cellular automaton (CA) model for simulating the complex dynamics of stock markets. Within this model, a stock market is represented by a two-dimensional lattice, of which each vertex stands for a trader. According to typical trading behavior in real stock markets, agents of only two types are adopted: fundamentalists and imitators. Our CA model is based on local interactions, adopting simple rules for representing the behavior of traders and a simple rule for price updating. This model can reproduce, in a simple and robust manner, the main characteristics observed in empirical financial time series. Heavy-tailed return distributions due to large price variations can be generated through the imitating behavior of agents. In contrast to other microscopic simulation (MS) models, our results suggest that it is not necessary to assume a certain network topology in which agents group together, e.g., a random graph or a percolation network. That is, long-range interactions can emerge from local interactions. Volatility clustering, which also leads to heavy tails, seems to be related to the combined effect of a fast and a slow process: the evolution of the influence of news and the evolution of agents' activity, respectively. In a general sense, these causes of heavy tails and volatility clustering appear to be common among some notable MS models that can confirm the main characteristics of financial markets.
Related Concept Videos
Non-equilibrium in the Cell
Mechanistic Models: Compartment Models in Individual and Population Analysis
Mechanistic Models: Compartment Models in Algorithms for Numerical Problem Solving
In individual population analyses, different algorithms are employed, such as Cauchy's method, which uses a...
Mechanistic Models: Overview of Compartment Models
Modeling with Differential Equations
Entropy within the Cell
