Spin models as microfoundation of macroscopic market models

Sebastian M. Krause and Stefan Bornholdt

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 18, 4048-4054

Abstract: Macroscopic price evolution models are commonly used for investment strategies. There are first promising achievements in defining microscopic agent based models for the same purpose. Microscopic models allow a deeper understanding of mechanisms in the market than the purely phenomenological macroscopic models, and thus bear the chance for better models for market regulation. However microscopic models and macroscopic models are commonly studied separately. Here, we exemplify a unified view of a microscopic and a macroscopic market model in a case study, deducing a macroscopic Langevin equation from a microscopic spin market model closely related to the Ising model. The interplay of the microscopic and the macroscopic view allows for a better understanding and adjustment of the microscopic model, as well, and may guide the construction of agent based market models as basis of macroscopic models.

Keywords: Econophysics; Agent based models; Financial markets; Microfoundation; Macroscopic market models; Ising model (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:18:p:4048-4054

DOI: 10.1016/j.physa.2013.04.044

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