A Mechanism for Pockets of Predictability in Complex Adaptive Systems

Jorgen Vitting Andersen and Didier Sornette

Papers from arXiv.org

Abstract: We document a mechanism operating in complex adaptive systems leading to dynamical pockets of predictability (``prediction days''), in which agents collectively take predetermined courses of action, transiently decoupled from past history. We demonstrate and test it out-of-sample on synthetic minority and majority games as well as on real financial time series. The surprising large frequency of these prediction days implies a collective organization of agents and of their strategies which condense into transitional herding regimes.

Date: 2004-10, Revised 2004-11
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Published in Europhys. Lett., 70 (5), 697-703 (2005)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:cond-mat/0410762

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