Volume 86, Number 5, June 2009
|Number of page(s)||5|
|Section||Interdisciplinary Physics and Related Areas of Science and Technology|
|Published online||15 June 2009|
Self-organization for the stylized facts and finite-size effects in a financial-market model
Centro Studi e Ricerche “E. Fermi” - Compendio del Viminale, 00184-Rome, Italy, EU
2 Dipartimento di Fisica, Università di Roma “Sapienza” - Piazzale Aldo Moro 2, 00185-Rome, Italy, EU
3 Istituto dei Sistemi Complessi, CNR - via dei Taurini 19, 00185-Rome, Italy, EU
Corresponding author: firstname.lastname@example.org
Accepted: 13 May 2009
We propose a mechanism to understand the phenomenon of self-organization of the stylized facts in financial markets. This question is addressed within a workable agent-based model which is particularly simple and mathematically well posed. A key element is the non-stationarity of the number of agents, that can enter or exit the market depending on the signal they perceive. This leads to a market dynamics which evolves spontaneously towards a regime with stylized facts. All situations without stylized facts are shown to be unstable. The stylized facts correspond to finite-size effects with respect to time and number of agents. These results have conceptual and practical implications that can be tested with suitable data.
PACS: 89.65.Gh – Economics; econophysics, financial markets, business and management / 89.65.-s – Social and economic systems / 89.75.-k – Complex systems
© EPLA, 2009
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