Related papers: Speculation and Power Law
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Economy is demanding new models, able to understand and predict the evolution of markets. To this respect, Econophysics is offering models of markets as complex systems, such as the gas-like model, able to predict money distributions…
We introduce an autoregressive-type model of prices in financial market taking into account the self-modulation effect. We find that traders are mainly using strategies with weighted feedbacks of past prices. These feedbacks are responsible…
Using the Generalised Lotka Volterra (GLV) model adapted to deal with muti agent systems we can investigate economic systems from a general viewpoint and obtain generic features common to most economies. Assuming only weak generic…
Based on empirical financial time-series, we show that the "silence-breaking" probability follows a super-universal power law: the probability of observing a large movement is inversely proportional to the length of the on-going…
The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…
Financial markets can be seen as complex systems in non-equilibrium steady state, one of whose most important properties is the distribution of price fluctuations. Recently, there have been assertions that this distribution is qualitatively…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
We develop a theory of securities price formation and dynamics based on quantum approach and without presuming any similarities with quantum mechanics. Disorder introduced by trading environment leads to probability distribution of returns…
The probability distribution of stock price changes is studied by analyzing a database (the Trades and Quotes Database) documenting every trade for all stocks in three major US stock markets, for the two year period Jan 1994 -- Dec 1995. A…
Market impact is the link between the volume of a (large) order and the price move during and after the execution of this order. We show that under no-arbitrage assumption, the market impact function can only be of power-law type.…
In nature or societies, the power-law is present ubiquitously, and then it is important to investigate the mathematical characteristics of power-laws in the recent era of big data. In this paper we prove the superposition of non-identical…
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
Zipf's power-law distribution is a generic empirical statistical regularity found in many complex systems. However, rather than universality with a single power-law exponent (equal to 1 for Zipf's law), there are many reported deviations…
We study the rank distribution, the cumulative probability, and the probability density of returns of stock prices of listed firms traded in four stock markets. We find that the rank distribution and the cumulative probability of stock…
We present a simple agent-based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism, and vice versa. Our agents invest…
The law of proportionate growth simply states that the time dependent change of a quantity $x$ is proportional to $x$. Its applicability to a wide range of dynamic phenomena is based on various assumptions for the proportionality factor,…
This paper describes an approach to economics that is inspired by quantum computing, and is motivated by the need to develop a consistent quantum mathematical framework for economics. The traditional neoclassical approach assumes that…
We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise…