Disorder-induced volatility of collective dynamics

Georges Harras, Claudio J. Tessone and Didier Sornette

No CCSS-10-001, Working Papers from ETH Zurich, Chair of Systems Design

Abstract: ``Disorder-induced volatility'' (DIV) describes the enhanced fluctuations of collective behaviors exhibited by bistable systems in the presence of a rapidly fluctuating external signal. At the DIV resonance, a defining characteristics is that the response of the system becomes uncorrelated with the external driving noise, making DIV resonance different from stochastic resonance. Numerical simulations and an analytical theory of a stochastic dynamical version of the Ising model on regular and random networks demonstrate the ubiquity and robustness of DIV, which is proposed as a possible cause of excess volatility in financial markets, of enhanced effective temperatures in a variety of out-of-equilibrium systems and of strong selective responses of immune systems of complex biological organisms.

Keywords: volatility; stochastic processes; financial markets (search for similar items in EconPapers)
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