Self-organizing Ising model of financial markets
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Publication:978853
DOI10.1140/EPJB/E2006-00391-6zbMATH Open1189.91138arXivphysics/0503230OpenAlexW1975541088MaRDI QIDQ978853FDOQ978853
Authors: Wei-Xing Zhou, D. Sornette 
Publication date: 25 June 2010
Published in: The European Physical Journal B. Condensed Matter and Complex Systems (Search for Journal in Brave)
Abstract: We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding, the impact of external news and private information, we test within the same model the hypothesis that agents are rational versus irrational. We find that the stylized facts of financial markets are reproduced only when agents are over-confident and mis-attribute the success of news to predict return to herding effects, thereby providing positive feedbacks leading to the model functioning close to the critical point.
Full work available at URL: https://arxiv.org/abs/physics/0503230
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Economic time series analysis (91B84) Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Experimental studies (91A90)
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Cited In (34)
- An Ising spin state explanation for financial asset allocation
- A generalized voter model with time-decaying memory on a multilayer network
- Linking market interaction intensity of 3D Ising type financial model with market volatility
- Investor structure and the price-volume relationship in a continuous double auction market: an agent-based modeling perspective
- Between complexity of modelling and modelling of complexity: an essay on econophysics
- Two-dimensional stochastic dynamics as model for time evolution of the financial market
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- Development of an agent-based speculation game for higher reproducibility of financial stylized facts
- The analysis of the dynamic optimization problem in econophysics from the point of view of the symplectic approach for constrained systems
- Criticality and punctuated equilibrium in a spin system model of a financial market
- A Generalized 2D-Dynamical Mean-Field Ising Model with a Rich Set of Bifurcations (Inspired and Applied to Financial Crises)
- Hierarchical structure of stock price fluctuations in financial markets
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- Dynamics of stocks prices based in the Black \& Scholes equation and nonlinear stochastic differentials equations
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- Statistical signatures in times of panic: markets as a self-organizing system
- Analysis of non-stationary dynamics in the financial system
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- STATISTICAL PROPERTIES AND MULTIFRACTAL BEHAVIORS OF MARKET RETURNS BY ISING DYNAMIC SYSTEMS
- Interaction in agent-based economics: a survey on the network approach
- Herding, minority game, market clearing and efficient markets in a simple spin model framework
- Classifying financial markets up to isomorphism
- Breaks down of the modeling of the financial market with addition of non-linear terms in the Itô stochastic process
- Complexity is a matter of distance
- Self-organization and the persistence of noise in financial markets
- Robust mathematical formulation and probabilistic description of agent-based computational economic market models
- Effect of boundary conditions on stochastic Ising-like financial market price model
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- GPU accelerated Monte Carlo simulation of the 2D and 3D Ising model
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- A macroscopic portfolio model: from rational agents to bounded rationality
- The minimal model of financial complexity
- Herd behavior and financial crashes: an interacting particle system approach
- Diversity-induced resonance in a model for opinion formation
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