A q-spin Potts model of markets: Gain–loss asymmetry in stock indices as an emergent phenomenon

Stefan Bornholdt

Physica A: Statistical Mechanics and its Applications, 2022, vol. 588, issue C

Abstract: Spin models of markets inspired by physics models of magnetism, as the Ising model, allow for the study of the collective dynamics of interacting agents in a market. The number of possible states has been mostly limited to two (buy or sell) or three options. However, herding effects of competing stocks and the collective dynamics of a whole market may escape our reach in the simplest models. Here I study a q-spin Potts model version of a simple Ising market model to represent the dynamics of a stock market index in a spin model. As a result, a self-organized gain–loss asymmetry in the time series of an index variable composed of stocks in this market is observed.

Keywords: Spin market model; Gain–loss-asymmetry; Potts model; Econophysics; Self-organization; Emergence (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:588:y:2022:i:c:s0378437121008384

DOI: 10.1016/j.physa.2021.126565

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