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Modeling social interactions based on individual behavior has always been an area of interest, but prior literature generally presumes rational behavior. Thus, such models may miss out on capturing the effects of biases humans are…
Bilateral trade, a fundamental topic in economics, models the problem of intermediating between two strategic agents, a seller and a buyer, willing to trade a good for which they hold private valuations. In this paper, we cast the bilateral…
We study properties of the cross-sectional distribution of returns. A significant anti-correlation between dispersion and cross-sectional kurtosis is found such that dispersion is high but kurtosis is low in panic times, and the opposite in…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
A numerical agent-based spin model of financial markets, based on the Potts model from statistical mechanics, with a novel interpretation of the spin variable (as regards financial-market models) is presented. In this model, a value of the…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
When making decisions under risk, people often exhibit behaviors that classical economic theories cannot explain. Newer models that attempt to account for these irrational behaviors often lack neuroscience bases and require the introduction…
We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential,…
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…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
We discuss the role of information entropy on the behaviour of random processes, and how this might take effect in the dynamics of financial market prices. We then go on to show how the Open Quantum Systems approach can be used as a more…
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…
Using frequency distributions of daily closing price time series of several financial market indexes, we investigate whether the bias away from an equiprobable sequence distribution found in the data, predicted by algorithmic information…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
The influence of the past price behaviour on the realized volatility is investigated in the present article. The results show that trending (drifting) prices lead to increased (decreased) realized volatility. This ``volatility induced by…
As AI agents increasingly act on behalf of human stakeholders in economic settings, understanding their behavior in complex market environments becomes critical. This article examines how Large Language Models coordinate on markets that are…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
Financial markets are influenced by human behavior that deviates from rationality due to cognitive biases. Traditional reinforcement learning (RL) models for financial decision-making assume rational agents, potentially overlooking the…