EXPECTATION BUBBLES IN A SPIN MODEL OF MARKETS: INTERMITTENCY FROM FRUSTRATION ACROSS SCALES

Stefan Bornholdt ()
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Stefan Bornholdt: Institut für Theoretische Physik, Universität Kiel, Leibnizstrasse 15, D-24098 Kiel, Germany

International Journal of Modern Physics C (IJMPC), 2001, vol. 12, issue 05, 667-674

Abstract: A simple spin model is studied, motivated by the dynamics of traders in a market, where expectation bubbles and crashes occur. The dynamics is governed by interactions, which are frustrated across different scales: while ferromagnetic couplings connect each spin to its local neighborhood, an additional coupling relates each spin to the global magnetization. This new coupling is allowed to be anti-ferromagnetic. The resulting frustration causes a metastable dynamics with intermittency and phases of chaotic dynamics. The model reproduces main observations of real economic markets as power-law distributed returns and clustered volatility.

Keywords: Econophysics; Dynamics of Markets; Statistical Mechanics of Spin Models; Order-Disorder Transitions; Metastability; Self-Organization (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1142/S0129183101001845

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