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We investigate the general problem of how to model the kinematics of stock prices without considering the dynamical causes of motion. We propose a stochastic process with long-range correlated absolute returns. We find that the model is…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
We demonstrate that the gain/loss asymmetry observed for stock indices vanishes if the temporal dependence structure is destroyed by scrambling the time series. We also show that an artificial index constructed by a simple average of a…
We examine dynamic coupling and feedback effects between High Frequency Traders (HFTs) and how they can destabilize markets. We develop a general framework for modelling dynamic interaction based on recurrence relations, and use this to…
Technical and fundamental analysis are traditional tools used to analyze individual stocks; however, the finance literature has shown that the price movement of each individual stock correlates heavily with other stocks, especially those…
We apply the potential force estimation method to artificial time series of market price produced by a deterministic dealer model. We find that dealers' feedback of linear prediction of market price based on the latest mean price changes…
We introduce matrix H theory, a framework for analyzing collective behavior arising from multivariate stochastic processes with hierarchical structure. The theory models the joint distribution of the multiple variables (the measured signal)…
In Part II of this paper, we concentrate our analysis on the price dynamical model with the moving average rules developed in Part I of this paper. By decomposing the excessive demand function, we reveal that it is the interplay between…
Increased day-trading activity and the subsequent jump in intraday volatility and trading volume fluctuations has raised considerable interest in models for financial market microstructure. We investigate the random transitions between two…
Stock networks, constructed from stock price time series, are a well-established tool for the characterization of complex behavior in stock markets. Following Mantegna's seminal paper, the linear Pearson's correlation coefficient between…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
We propose a picture of stock market crashes as critical points in a hierachical system with discrete scaling. The critical exponent is then complex, leading to log-periodic fluctuations in stock market indexes. We present ``experimental''…
We characterize the collective phenomena of a liquid market. By interpreting the behavior of a no-arbitrage N asset market in terms of a particle system scenario, (thermo)dynamical-like properties can be extracted from the asset kinetics.…
We present here a general framework, expressed by a system of nonlinear differential equations, suitable for the modelling of taxation and redistribution in a closed (trading market) society. This framework allows to describe the evolution…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
The correct understanding of commodity price dynamics can bring relevant improvements in terms of policy formulation both for developing and developed countries. Agricultural, metal and energy commodity prices might depend on each other:…
A Hidden Markov Model for intraday momentum trading is presented which specifies a latent momentum state responsible for generating the observed securities' noisy returns. Existing momentum trading models suffer from time-lagging caused by…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
The dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other…