  We propose a model with heterogeneous interacting traders which can explain
some of the stylized facts of stock market returns. In the model
synchronization effects, which generate large fluctuations in returns, can
arise either from an aggregate exogenous shock or, even in its absence, purely
from communication and imitation among traders. A trade friction is introduced
which, by responding to price movements, creates a feedback mechanism on future
trading and generates volatility clustering.
