MICROSCOPIC SPIN MODEL FOR THE STOCK MARKET WITH ATTRACTOR BUBBLING AND HETEROGENEOUS AGENTS

A. Krawiecki ()
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A. Krawiecki: Faculty of Physics, and Center of Excellence for the Complex System Research, Warsaw University of Technology, Koszykowa 75, PL-00-662 Warsaw, Poland

International Journal of Modern Physics C (IJMPC), 2005, vol. 16, issue 04, 549-559

Abstract: A multi-agent spin model for changes of prices in the stock market is considered, based on the Ising-like cellular automaton with global, randomly varying in time interactions between traders. The presence of "fundamentalists" is taken into account by introducing additional term in the local field acting on each agent, dependent on the ratio between the actual stock price and its fundamental value. Numerical multi-agent as well as mean-field simulations show that for properly chosen parameters, the time series of logarithmic price returns exhibit bursting typical of volatility clustering, due to appearance of attractor bubbling in the model. Distributions of price returns show the power-law tails, and the corresponding cumulative distributions have regions of power scaling, with exponents comparable to those observed in empirical time series of stock price returns.

Keywords: Econophysics; microscopic stock market models; on–off intermittency; multiplicative noise (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (11)

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DOI: 10.1142/S0129183105007285

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