Efficiency of a self-organizing Ising model of financial markets

Jude Maria V. Antenorcruz and Rene C. Batac
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Jude Maria V. Antenorcruz: Department of Physics, College of Science, De La Salle University, 2401 Taft Avenue, Manila 0922, Philippines
Rene C. Batac: Department of Physics, College of Science, De La Salle University, 2401 Taft Avenue, Manila 0922, Philippines†Dr. Andrew L. Tan Data Science Institute, De La Salle University, 2401 Taft Avenue, Manila 0922, Philippines

International Journal of Modern Physics C (IJMPC), 2024, vol. 35, issue 01, 1-16

Abstract: Individual agents in financial markets decide based on market conditions, external news and information, and personal idiosyncrasies; from the collective action of such agents arise the unpredictable market dynamics. These actions affect the overall market efficiency, which measures how well the price reflects all available information. Here, we implement the self-organizing Ising model of Zhou and Sornette [Eur. Phys. J. BÂ 55, 175 (2007)] to probe the efficiency of simulated financial markets under various conditions. Efficiency is parametrized by the dispersion of the generalized Hurst exponents obtained from multifractal detrended fluctuation analysis. Scanning different model parameter sets reveals the regimes of efficiency values in simulated markets that compare with those obtained from real-world data.

Keywords: Financial markets; time series analysis; Ising model; multifractal detrended fluctuation analysis; Hurst exponents (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S012918312450013X

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