Self-organizing Ising model of financial markets

Wei-Xing Zhou and D. Sornette ()

The European Physical Journal B: Condensed Matter and Complex Systems, 2007, vol. 55, issue 2, 175-181

Abstract: We study a dynamical Ising-like model of agents' opinions (buy or sell) with learning, in which the coupling coefficients are re-assessed continuously in time according to how past external news (time-varying magnetic field) have explained realized market returns. By combining herding, the impact of external news and private information, we find that the stylized facts of financial markets are reproduced only when agents misattribute the success of news to predict return to herding effects, thereby providing positive feedbacks leading to the model functioning close to the Ising critical point. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2007

Keywords: 64.60.Ht Dynamic critical phenomena, 89.65.Gh Economics; econophysics, financial markets, business and management, 87.23.Ge Dynamics of social systems, (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:eurphb:v:55:y:2007:i:2:p:175-181

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DOI: 10.1140/epjb/e2006-00391-6

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