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We propose coalescent mechanism of economic grow because of redistribution of external resources. It leads to Zipf distribution of firms over their sizes, turning to stretched exponent because of size-dependent effects, and predicts…
We propose a framework for determining whether the causal dependence of an outcome $Y$ on a covariate $X$ changes at a given time point, given confounders $\boldsymbol{Z}$. For instance, in financial markets, the effect of a market…
Using techniques from information geometry, we construct a semi-Hamiltonian system modelling trader beliefs in a binary asset market and study the impact of inequality or asymmetry in beliefs, information, and power on price dynamics. We…
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 light of the growing interest in agent-based market models, we bring together several earlier works in which we considered the topic of self-consistent market modelling. Building upon the binary game structure of Challet and Zhang, we…
In this paper we extend the series of our studies on the properties of an interacting particle model for market microstructure. In our earlier work we defined a Markov process on the majority opinion of the agents, obtained the transition…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical…
In this article, we established a stock market model based on agents' investing mentality. The agents decide whether to purchase the shares at the probability, according to their anticipation of the market's behaviors. The expectation of…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
An artificial stock market is established with the modeling method and ideas of cellular automata. Cells are used to represent stockholders, who have the capability of self-teaching and are affected by the investing history of the…
Two-sided matching markets have long existed to pair agents in the absence of regulated exchanges. A common example is school choice, where a matching mechanism uses student and school preferences to assign students to schools. In such…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
We present a model of price formation in an inelastic market whose dynamics are partially driven by both money flows and their impact on asset prices. The money flow to the market is viewed as an investment policy of outside investors. For…
This paper examines quantile dependence between international stock markets and evaluates its use for improving volatility forecasting. First, we analyze quantile dependence and directional predictability between the US stock market and…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
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…
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…
We propose a model for equity trading in a population of agents where each agent acts to achieve his or her target stock-to-bond ratio, and, as a feedback mechanism, follows a market adaptive strategy. In this model only a fraction of…