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This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
There are multiple explanations for stylized facts in high-frequency trading, including adaptive and informed agents, many of which have been studied through agent-based models. This paper investigates an alternative explanation by…
Recently research on bubble and its burst attract much interest of researchers in various field such as economics and physics. Economists have been regarding bubble as a disorder in prices. However, this research strategy has overlooked an…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
We show that infinite divisibility of a trading commodity leads to a self-sustained price bubble when traders use adaptive investment strategies. The adaptive strategy can be viewed as a psychological response of a trader to the situation…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
The price of financial assets are, since Bachelier, considered to be described by a (discrete or continuous) time sequence of random variables, i.e a stochastic process. Sharp scaling exponents or unifractal behavior of such processes has…
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive…
We test the predictions of the sticky information model using a survey dataset by comparing shoppers accuracy in recalling the prices of regulated and comparable unregulated products. Because regulated product prices are capped, they are…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Financial markets provide an ideal frame for the study of crossing or first-passage time events of non-Gaussian correlated dynamics mainly because large data sets are available. Tick-by-tick data of six futures markets are herein considered…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…