Market Dynamics of Information Avalanches

Bernhard K Meister

Papers from arXiv.org

Abstract: Financial markets convert the incremental arrival of information into asset price changes. In a sandpile model grains of sand represent bits of data, and the size of an avalanche, governed by a scaling law, is linked to price volatility. While this model of self-organized criticality reproduces stylized facts, it also identifies a structural tension between the non-arbitrage condition and price adjustments consistent with a constant Sharpe ratio.

Date: 2026-02
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