Two-phase behaviour of financial markets

Vasiliki Plerou (), Parameswaran Gopikrishnan and H. Eugene Stanley
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Vasiliki Plerou: Boston University
Parameswaran Gopikrishnan: Boston University
H. Eugene Stanley: Boston University

Nature, 2003, vol. 421, issue 6919, 130-130

Abstract: Abstract Buying and selling in financial markets is driven by demand, which can be quantified by the imbalance in the number of shares transacted by buyers and sellers over a given time interval. Here we analyse the probability distribution of demand, conditioned on its local noise intensity Σ, and discover the surprising existence of a critical threshold, Σc. For Σ Σc, two most probable values emerge that are symmetrical around zero demand, corresponding to excess demand and excess supply1; we interpret this as an out-of-equilibrium phase in which the market behaviour is mainly buying for half of the time, and mainly selling for the other half.

Date: 2003
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DOI: 10.1038/421130a

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