Trust in Foreseeing Neighbours - A Novel Threshold Model of Financial Market

• Authors: J. Lipski , R. Kutner
• Languages of publication: EN

Abstracts

EN

The three-state agent-based 2D model of financial markets in the version proposed by Giulia Iori in 2002 has been herein extended. We have introduced the increase of herding behaviour by modelling the altering trust of an agent in his nearest neighbours. The trust increases if the neighbour has foreseen the price change correctly and the trust decreases in the opposite case. Our version only slightly increases the number of parameters present in the Iori model. This version well reproduces the main stylized facts observed on financial markets. That is, it reproduces log-returns clustering, fat-tail log-returns distribution and power-law decay in time of the volatility autocorrelation function.

Keywords

EN

89.65.Gh; 02.50.Ey; 89.75.Fb; 45.70.Vn

Discipline

• 02.50.Ey: Stochastic processes
• 89.65.Gh: Economics; econophysics, financial markets, business and management(for economic issues regarding production and use of renewable energy, see 88.05.Lg)
• 45.70.Vn: Granular models of complex systems; traffic flow
• 89.75.Fb: Structures and organization in complex systems

• Journal: Acta Physica Polonica A
• Year: 2013
• Volume: 123
• Issue: 3
• Pages: 584-588

Dates

published

2013-03

Contributors

author

J. Lipski

• Institute of Theoretical Physics, Faculty of Physics, University of Warsaw Hoża 69, PL-00681 Warsaw, Poland

author

R. Kutner

• Institute of Theoretical Physics, Faculty of Physics, University of Warsaw Hoża 69, PL-00681 Warsaw, Poland

References

• [1] G. Iori, doi: 10.1016/S0167-2681(01)00164-0, J. Econom. Behav. Organiz. 49, 269 (2002)
• [2] W.X. Zhou, D. Sornette, doi: 10.1140/epjb/e2006-00391-6, Europ. Phys. J. B 55, 175 (2007)
• [3] P. Sieczka, J.A. Hołyst, Acta Phys. Pol. A 114, 525 (2008)
• [4] J. Voit, The Statistical Mechanics of Financial Markets, Springer-Verlag, Berlin 2001
• [5] M. Denys, T. Gubiec, R. Kutner, doi: 10.12693/APhysPolA.123.513, Acta Phys. Pol. A 123, 513 (2013)
• [6] M. Cristelli, L. Pietronero, A. Zaccaria, Critical Overview of Agent-Based Models for Economics, Proc. School of Physics 'E. Fermi', course CLXXVI, Eds. F. Mallnace, H.E. Stanley, Societa' Italiana di Fisica - IOS Press, Bologna-Amsterdam, 2012, p. 235
• [7] J.D. Farmer, D. Foley, doi: 10.1038/460685a, Nature 460, 685 (2009)
• [8] M. Denys, M.Sc. Thesis, Warszawa 2011
• [9] J.A. Lipski, Bachelor Thesis, Warszawa 2011
• [10] Market data from the website http://www.stooq.pl

Identifiers

DOI

10.12693/APhysPolA.123.584