Related papers: Speculation and Power Law
In economics, there are many ways to describe the interaction between a "seller" and a "buyer". The most common one, with which we interact almost every day, is selling for a fixed price. This option is perfect for selling a mass product,…
In the present work, via computational simulation we study the statistical distribution of people versus number of steps acquired by them in a learning process, considering Darwin classical theory of evolution, i.e. competition, learning…
Investigations of inverse statistics (a concept borrowed from turbulence) in stock markets, exemplified with filtered Dow Jones Industrial Average, S&P 500, and NASDAQ, have uncovered a novel stylized fact that the distribution of exit time…
We introduce a non-growth model that generates the power-law distribution with the Zipf exponent. There are N elements, each of which is characterized by a quantity, and at each time step these quantities are redistributed through binary…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…
In this work we essentially reinterpreted the Sieczka-Ho{\l}yst (SH) model to make it more suited for description of real markets. For instance, this reinterpretation made it possible to consider agents as crafty. These agents encourage…
The opinion dynamics of economic agents is modeled with the link structure influenced by the resulting opinions: Links between people of nearly the same opinion are more stable than those between people of vastly different opinions. A…
We explore nature of price formation in financial markets and develop a theory of bid and ask price dynamics in which the two prices form due to quantum-chaotic interaction between buy and sell orders. In this model bid and ask prices are…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
Positive feedback trading, which buys when prices rise and sells when prices fall, has long been criticized for being destabilizing as it moves prices away from the fundamentals. Motivated by the relationship between positive feedback…
Based on the new type of random walk process called the Potentials of Unbalanced Complex Kinetics (PUCK) model, we theoretically show that the price diffusion in large scales is amplified 2/(2 + b) times, where b is the coefficient of…
We introduce and solve a model that mimics the herding effect in financial markets when groups of agents share information. The number of agents in the model is growing and at each time step either (i) with probability $p$ an incoming agent…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
An exact solution is presented to a model that mimics the crowding effect in financial markets which arises when groups of agents share information. We show that the size distribution of groups of agents has a power law tail with an…
We propose an agent-based model of collective opinion formation to study the wisdom of crowds under social influence. The opinion of an agent is a continuous positive value, denoting its subjective answer to a factual question. The wisdom…
A mapping of nonextensive statistical mechanics into Gibbs' statistical mechanics exists, which leads to a generalization of Einstein's formula for fluctuations. A unified treatment of stability of relaxed states in nonextensive statistical…
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in…
We statistically investigate the distribution of share price and the distributions of three common financial indicators using data from approximately 8,000 companies publicly listed worldwide for the period 2004-2013. We find that the…
A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate…