Related papers: Speculation and Power Law
Power law distributions of macroscopic observables are ubiquitous in both the natural and social sciences. They are indicative of correlated, cooperative phenomena between groups of interacting agents at the microscopic level. In this paper…
The average economic agent is often used to model the dynamics of simple markets, based on the assumption that the dynamics of many agents can be averaged over in time and space. A popular idea that is based on this seemingly intuitive…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
Trade is one of the essential feature of human intelligence. The securities market is the ultimate expression of it. The fundamental indicators of stocks include information as well as the effects of noise and bias on the stock prices;…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
In our simplified description `wealth' is money ($m$). A kinetic theory of gas like model of money is investigated where two agents interact (trade) selectively and exchange some amount of money between them so that sum of their money is…
We introduce preferential behavior into the study on statistical mechanics of money circulation. The computer simulation results show that the preferential behavior can lead to power laws on distributions over both holding time and amount…
The effects of saving and spending patterns on holding time distribution of money are investigated based on the ideal gas-like models. We show the steady-state distribution obeys an exponential law when the saving factor is set uniformly,…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
A class of conserved models of wealth distributions are studied where wealth (or money) is assumed to be exchanged between a pair of agents in a population like the elastically colliding molecules of a gas exchanging energy. All sorts of…
Multiplicative random processes in (not necessaryly equilibrium or steady state) stochastic systems with many degrees of freedom lead to Boltzmann distributions when the dynamics is expressed in terms of the logarithm of the normalized…
A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…
The importance of the power law has been well realized in econophysics over the last decade. For instance, the distribution of the rate of stock price variation and of personal assets show the power law. While these results reveal the…
Power law is one of the the simplest forms of the relationship between different variables of a system. It leads naturally to the introduction of compound parameters describing physical properties of the system. Often one of the variables…
Power law or generalized polynomial regressions with unknown real-valued exponents and coefficients, and weakly dependent errors, are considered for observations over time, space or space--time. Consistency and asymptotic normality of…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on…