Theoretical analysis of potential forces in markets

Misako Takayasu, Takayuki Mizuno and Hideki Takayasu

Physica A: Statistical Mechanics and its Applications, 2007, vol. 383, issue 1, 115-119

Abstract: We show that random walks in a moving potential function, with its center at the moving average of market prices, are represented in the form of the self-modulation model. From this point of view we confirm the existence of non-trivial autocorrelation in real market price changes. By generalizing the formulation of potential function we prove that the ARCH model belongs to the special case of random walk in an asymmetric potential with randomly changing coefficient.

Keywords: Market price; Random walk; Self-modulation; Potential force (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:383:y:2007:i:1:p:115-119

DOI: 10.1016/j.physa.2007.04.094

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