Self-organizing Ising model of financial markets

DOI10.1140/EPJB/E2006-00391-6MaRDI QIDQ978853zbMATH OpenOpenAlexFDO

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)

Full work available at URL https://arxiv.org/abs/physics/0503230, http://hdl.handle.net/20.500.11850/2821

Mathematics Subject Classification ID

Economic time series analysis (91B84) Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Experimental studies (91A90)

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.

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Cited in

(34)

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• GPU accelerated Monte Carlo simulation of the 2D and 3D Ising model
• Two-dimensional stochastic dynamics as model for time evolution of the financial market
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• The minimal model of financial complexity
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• Diversity-induced resonance in a model for opinion formation
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• Complexity is a matter of distance
• Robust mathematical formulation and probabilistic description of agent-based computational economic market models
• Breaks down of the modeling of the financial market with addition of non-linear terms in the Itô stochastic process
• Ising model of financial markets with many assets
• Statistical signatures in times of panic: markets as a self-organizing system
• Herding, minority game, market clearing and efficient markets in a simple spin model framework
• Development of an agent-based speculation game for higher reproducibility of financial stylized facts
• Modeling of the financial market using the two-dimensional anisotropic Ising model
• Dynamics of stocks prices based in the Black \& Scholes equation and nonlinear stochastic differentials equations
• 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
• Effect of boundary conditions on stochastic Ising-like financial market price model
• Herd behavior and financial crashes: an interacting particle system approach
• Stochastic process with multiplicative structure for the dynamic behavior of the financial market
• Analysis of non-stationary dynamics in the financial system
• STATISTICAL PROPERTIES AND MULTIFRACTAL BEHAVIORS OF MARKET RETURNS BY ISING DYNAMIC SYSTEMS
• Self-organization and the persistence of noise in financial markets
• The analysis of the dynamic optimization problem in econophysics from the point of view of the symplectic approach for constrained systems
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• A macroscopic portfolio model: from rational agents to bounded rationality
• Interaction in agent-based economics: a survey on the network approach
• Between complexity of modelling and modelling of complexity: an essay on econophysics
• Price dynamics of the financial markets using the stochastic differential equation for a potential double well

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