Related papers: Self-organization and phase transition in financia…

In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…

We explore various extensions of Challet and Zhang's Minority Game in an attempt to gain insight into the dynamics underlying financial markets. First we consider a heterogeneous population where individual traders employ differing `time…

We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…

Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…

In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…

We present a novel microscopic stock market model consisting of a large number of random agents modeling traders in a market. Each agent is characterized by a set of parameters that serve to make iterated predictions of two successive…

We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…

Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…

We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…

Metastability is a phenomenon observed in stochastic systems which stay in a false-equilibrium within a region of its state space until the occurrence of a sequence of rare events that leads to an abrupt transition to a different region.…

Is the large influence that mutual funds assert on the U.S. financial system spread across many funds, or is it is concentrated in only a few? We argue that the dominant economic factor that determines this is market efficiency, which…

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…

Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…

We study the role of active and passive investors in an investment market with uncertainties. Active investors concentrate on a single or a few stocks with a given probability of determining the quality of them. Passive investors spread…

Confidence is an essential ingredient of success in a wide range of domains ranging from job performance and mental health, to sports, business, and combat. Some authors have suggested that not just confidence but overconfidence-believing…

In complex systems like financial market, risk tolerance of individuals is crucial for system resilience.The single-security price limit, designed as risk tolerance to protect investors by avoiding sharp price fluctuation, is blamed for…

The role of portfolio construction in the implementation of equity market neutral factors is often underestimated. Taking the classical momentum strategy as an example, we show that one can significantly improve the main strategy's features…

The minimum spanning tree is used to study the process of market integration for a large group of national stock market indices. We show how the asset tree evolves over time and describe the dynamics of its normalized length, mean…

A brief review is given of the minority game, an idealized model of a market of speculative agents, and its complex many-body behaviour. Particular consideration is given to the consequences and implications of correlations between…

On a capital market the social group is formed from traders. Individual behaviour of agents is influenced by the need to associate with other agents and to obtain the approval of other agents in the group. Making decisions an individual…