Related papers: News-driven Expectations and Volatility Clustering
We propose how to quantify high-frequency market sentiment using high-frequency news from NASDAQ news platform and support vector machine classifiers. News arrive at markets randomly and the resulting news sentiment behaves like a…
A simple spin model is studied, motivated by the dynamics of traders in a market where expectation bubbles and crashes occur. The dynamics is governed by interactions which are frustrated across different scales: While ferromagnetic…
This study utilised the dynamics of five time-varying models to estimate six essential features of financial return volatility that are relevant for robust risk management. These features include pronounced persistence, mean reversion,…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…
Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…
Volatility is a natural risk measure in finance as it quantifies the variation of stock prices. A frequently considered problem in mathematical finance is to forecast different estimates of volatility. What makes it promising to use deep…
Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying…
The marvel of markets lies in the fact that dispersed information is instantaneously processed and used to adjust the price of goods, services and assets. Financial markets are particularly efficient when it comes to processing information;…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
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…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
In many physical, social or economical phenomena we observe changes of a studied quantity only in discrete, irregularly distributed points in time. The stochastic process used by physicists to describe this kind of variables is 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,…
We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…
The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…