Related papers: Self-referential behaviour, overreaction and conve…

Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…

We study expert advice under reputational incentives, with sell-side equity research as the lead application. A long-lived analyst receives a continuous private signal about a binary payoff and recommends a risky (Buy) or safe action.…

The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…

Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…

A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour…

Many biological, psychological and economic experiments have been designed where an organism or individual must choose between two options that have the same expected reward but differ in the variance of reward received. In this way,…

We introduce a minimal Agent Based Model for financial markets to understand the nature and Self-Organization of the Stylized Facts. The model is minimal in the sense that we try to identify the essential ingredients to reproduce the main…

At the core of the Ouroboros Model lies a self-referential recursive process with alternating phases of data acquisition and evaluation. Memory entries are organized in schemata. Activation at a time of part of a schema biases the whole…

Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…

We consider situations where consumers are aware that a statistical model determines the price of a product based on their observed behavior. Using a novel experiment varying the context similarity between participant data and a product, we…

In real-world stock markets, certain chart patterns -- such as price declines near historical highs -- cannot be fully explained by fundamentals alone. These phenomena suggest the presence of path dependence in price formation, where…

The decision process requires information about the present state of the system, but in economy acquiring data and processing them is an expensive and time consuming process. Therefore the state of the system is measured and announced at…

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…

We examine dynamic coupling and feedback effects between High Frequency Traders (HFTs) and how they can destabilize markets. We develop a general framework for modelling dynamic interaction based on recurrence relations, and use this to…

Before the massive spread of computer technology, information was far from complex. The development of technology shifted the paradigm: from individuals who faced scarce and costly information to individuals who face massive amounts of…

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…

This paper presents a method for forecasting limit order book durations using a self-exciting flexible residual point process. High-frequency events in modern exchanges exhibit heavy-tailed interarrival times, posing a significant challenge…

Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…

Social, technological and economic time series are divided by events which are usually assumed to be random albeit with some hierarchical structure. It is well known that the interevent statistics observed in these contexts differs from the…

The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…