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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 adapt continuous time random walk (CTRW) formalism to describe asset price evolution and discuss some of the problems that can be treated using this approach. We basically focus on two aspects: (i) the derivation of the price…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…
Many empirical studies estimate causal effects in environments where economic units interact through spatial or network connections. In such settings, outcomes are jointly determined, and treatment induced shocks propagate across…
Reverse causality is a common causal misperception that distorts the evaluation of private actions and public policies. This paper explores the implications of this error when a decision maker acts on it and therefore affects the very…
Financial markets exhibit highly dynamic and complex behaviors shaped by both historical price trajectories and exogenous narratives, such as news, policy interpretations, and social media sentiment. The heterogeneity in these data and the…
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…
The methodology presented provides a quantitative way to characterize investor behavior and price dynamics within a particular asset class and time period. The methodology is applied to a data set consisting of over 250,000 data points of…
We present an empirical argument against the existence of single timeline backward time travel using the price behavior of prediction markets. If rational agents could travel backward in time, binary prediction contracts would converge to…
The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states…
Background: Confirmation bias is the tendency to acquire or evaluate new information in a way that is consistent with one's preexisting beliefs. It is omnipresent in psychology, economics, and even scientific practices. Prior theoretical…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
Financial stock returns correlations have been studied in the prism of random matrix theory, to distinguish the signal from the "noise". Eigenvalues of the matrix that are above the rescaled Marchenko Pastur distribution can be interpreted…
We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
Agent-based modeling is a powerful simulation technique to understand the collective behavior and microscopic interaction in complex financial systems. Recently, the concept for determining the key parameters of the agent-based models from…
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…
The two phase behavior in financial markets actually means the bifurcation phenomenon, which represents the change of the conditional probability from an unimodal to a bimodal distribution. In this paper, the bifurcation phenomenon in…
We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…
This work suggests modifications to a previously introduced class of heterogeneous agent models that allow for the inclusion of different types of agent motivations and behaviours in a unified way. The agents operate within a highly…