An interacting-agent model of financial markets from the viewpoint of nonextensive statistical mechanics

Taisei Kaizoji ()

Physica A: Statistical Mechanics and its Applications, 2006, vol. 370, issue 1, 109-113

Abstract: In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders to be influenced by the other traders’ investment attitudes [Kaizoji, Physica A 287 (2000) 493], and formulate the traders’ decision-making regarding investment as the maximum entropy principle for nonextensive entropy [C. Tsallis, J. Stat. Phys. 52 (1988) 479]. We demonstrate that the equilibrium probability distribution function of the traders’ investment attitude is the q-exponential distribution. We also show that the power-law distribution of the volatility of price fluctuations, which is often demonstrated in empirical studies can be explained naturally by our model which originates in the collective crowd behavior of many interacting-agents.

Keywords: Interacting agents; Relative expectation formation; Ising-like model; Nonextensive statistical mechanics; Power-laws of volatility (search for similar items in EconPapers)
Date: 2006
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437106004444
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
Working Paper: An interacting-agent model of financial markets from the viewpoint of nonextensive statistical mechanics (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:370:y:2006:i:1:p:109-113

DOI: 10.1016/j.physa.2006.04.031

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().