Related papers: Black was right: Price is within a factor 2 of Val…
We introduce a minimal Agent Based Model for financial markets to understand the nature and Self-Organization of the Stylized Facts. The model is minimal in the sense that we try to identify the essential ingredients to reproduce the main…
Trend and Value are pervasive anomalies, common to all financial markets. We address the problem of their co-existence and interaction within the framework of Heterogeneous Agent Based Models (HABM). More specifically, we extend the…
We describe how the market-based average and volatility of the "actual" return, which the investors gain within their market sales, depend on the statistical moments, volatilities, and correlations of the current and past market trade…
Starting from the characterization of the past time evolution of market prices in terms of two fundamental indicators, price velocity and price acceleration, we construct a general classification of the possible patterns characterizing the…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
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…
This study presents an analytical approach to sector rotation, leveraging both factor models and fundamental metrics. We initiate with a systematic classification of sectors, followed by an empirical investigation into their returns.…
We establish the existence of anomalous excess returns based on trend following strategies across four asset classes (commodities, currencies, stock indices, bonds) and over very long time scales. We use for our studies both futures time…
It is now well established empirically that financial price changes are distributed according to a power law, with cubic exponent. This is a fascinating regularity, as it holds for various classes of securities, on various markets, and on…
We study an equilibrium-based continuous asset pricing problem for the securities market. In the previous work [16], we have shown that a certain price process, which is given by the solution to a forward backward stochastic differential…
When prices reflect all available information, they oscillate around an equilibrium level. This oscillation is the result of the temporary market impact caused by waves of buyers and sellers. This price behavior can be approximated through…
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…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
A minimal model of a market of myopic non-cooperative agents who trade bilaterally with random bids reproduces qualitative features of short-term electric power markets, such as those in California and New England. Each agent knows its own…
We propose and document the evidence for an analogy between the dynamics of granular counter-flows in the presence of bottlenecks or restrictions and financial price formation processes. Using extensive simulations, we find that the…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…
In this paper we provide compelling evidence of cyclical mean reversion and multiperiod stock return predictability over horizons of about 30 years with a half-life of about 15 years. This implies that the US stock market follows a…
Financial price changes obey two universal properties: they follow a power law and they tend to be clustered in time. The second regularity, known as volatility clustering, entails some predictability in the price changes: while their sign…
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…