Microscopic models for long ranged volatility correlations

DOI10.1016/S0378-4371(01)00280-1MaRDI QIDQ5947863zbMATH OpenOpenAlexWikidataFDO

Authors Irene Giardina, Jean-Philippe Bouchaud, Marc Mézard

Publication date 23 October 2001

Published in Physica A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/cond-mat/0105076

zbMATH Keywords

financial marketsminority game modelrandom-walk like processes

Mathematics Subject Classification ID

Auctions, bargaining, bidding and selling, and other market models (91B26) Statistical methods; economic indices and measures (91B82)

Abstract: We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated to random-walk like processes. We numerically demonstrate our scenario in the framework of simplified market models, such as the Minority Game model with an inactive strategy, or a more sophisticated version that includes some price dynamics. We show that real market data can be surprisingly well accounted for by these simple models.

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Cites work

• A Rational Route to Randomness
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• HERD BEHAVIOR AND AGGREGATE FLUCTUATIONS IN FINANCIAL MARKETS
• On a universal mechanism for long-range volatility correlations
• PHASE TRANSITION IN A TOY MARKET
• Power laws in economics and finance: some ideas from physics
• TRADER DYNAMICS IN A MODEL MARKET
• VOLATILITY CLUSTERING IN FINANCIAL MARKETS: A MICROSIMULATION OF INTERACTING AGENTS

Cited in

(16)

• Generalized persistence probability in a dynamic economic index
• Possible origin of the non-linear long-term autocorrelations within the Gaussian regime
• Microstructure models with short-term inertia and stochastic volatility
• From micro-correlations to macro-correlations
• Analysis of a decision model in the context of equilibrium pricing and order book pricing
• Time series analysis for minority game simulations of financial markets
• The extraction of macromodel and origin of long-ranged correlations
• First-passage-time distribution for variable-diffusion processes
• From minority game to Black \& Scholes pricing
• On a universal mechanism for long-range volatility correlations
• Non-constant rates and over-diffusive prices in a simple model of limit order markets
• COULD SHORT SELLING MAKE FINANCIAL MARKETS TUMBLE?
• PERSISTENCE PROBABILITY IN FINANCIAL DYNAMICS
• Market mechanism and expectations in minority and majority games
• Structure of persistently prominent stocks in financial dynamics
• Statistical regularities in the return intervals of volatility

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