Non-equilibrium stochastic model for stock exchange market

Yup Kim, Ikhyun Kwon and Soon-Hyung Yook

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 23, 5907-5913

Abstract: We study the effect of the topology of industrial relationship (IR) between the companies in a stock exchange market on the universal features in the market. For this we propose a stochastic model for stock exchange markets based on the behavior of technical traders. From the numerical simulations we measure the return distribution, P(R), and the autocorrelation function of the volatility, C(T), and find that the observed universal features in real financial markets are originated from the heterogeneity of IR network topology. Moreover, the heterogeneous IR topology can also explain Zipf–Pareto’s law for the distribution of market value of equity in the real stock exchange markets.

Keywords: Econophysics; Stochastic model for financial markets; Financial network (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:23:p:5907-5913

DOI: 10.1016/j.physa.2013.07.032

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