Related papers: Market force, ecology and evolution
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
Mathematical methods of population genetics and framework of exchangeability provide a Markov chain model for analysis and interpretation of stochastic behaviour of equity markets, explaining, in particular, market shape formation,…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
Persistent economic competition is often justified as a mechanism of innovation, efficiency, and welfare maximization. Yet empirical evidence across disciplines reveals that competition systematically generates fragility, inequality, and…
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…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore…
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…
A non-Bayesian time-varying model is developed by introducing the concept of the degree of market efficiency that varies over time. This model may be seen as a reflection of the idea that continuous technological progress alters the trading…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
The population dynamics and stability of ecosystems of interacting species is studied from the perspective of non-equilibrium thermodynamics by assuming that species, through their biotic and abiotic interactions, are units of entropy…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
The economic and financial variables of economic agents determine macroeconomic variables. Current models consider agents' variables that are determined by the sums of values and volumes of agents' trades during some time interval {\Delta}.…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…