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We decompose returns for portfolios of bottom-ranked, lower-priced assets relative to the market into rank crossovers and changes in the relative price of those bottom-ranked assets. This decomposition is general and consistent with…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
Observations indicate that the distributions of stock returns in financial markets usually do not conform to normal distributions, but rather exhibit characteristics of high peaks, fat tails and biases. In this work, we assume that the…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
We endorse the idea, suggested in recent literature, that BitCoin prices are influenced by sentiment and confidence about the underlying technology; as a consequence, an excitement about the BitCoin system may propagate to BitCoin prices…
Stock prices are observed to be random walks in time despite a strong, long term memory in the signs of trades (buys or sells). Lillo and Farmer have recently suggested that these correlations are compensated by opposite long ranged…
Financial market dynamics is rigorously studied via the exact generalized Langevin equation. Assuming market Brownian self-similarity, the market return rate memory and autocorrelation functions are derived, which exhibit an…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
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…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
This note explores the consequences of nonlinear price impact functions on price dynamics within the chartist-fundamentalist framework. Price impact functions may be nonlinear with respect to trading volume. As indicated by recent empirical…
In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author…
The numeraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numeraire portfolio depends on market characteristics, which…
The real monetary economy is grounded upon monetary flow equilibration or the activity of actualizing monetary flow continuity at each economic agent except for the central bank. Every update of monetary flow continuity at each agent…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
We propose coalescent mechanism of economic grow because of redistribution of external resources. It leads to Zipf distribution of firms over their sizes, turning to stretched exponent because of size-dependent effects, and predicts…
We investigate the financial market dynamics by introducing a heterogeneous agent-based opinion formation model. In this work, we organize the individuals in a financial market by their trading strategy, namely noise traders and…
As a model of market price, we introduce a new type of random walk in a moving potential which is approximated by a quadratic function with its center given by the moving average of its own trace. The properties of resulting random walks…