| Issue |
EPL
Volume 101, Number 2, February 2013
|
|
|---|---|---|
| Article Number | 28001 | |
| Number of page(s) | 6 | |
| Section | Interdisciplinary Physics and Related Areas of Science and Technology | |
| DOI | https://doi.org/10.1209/0295-5075/101/28001 | |
| Published online | 04 February 2013 | |
Three-state herding model of the financial markets
Institute of Theoretical Physics and Astronomy, Vilnius University - A. Gostauto st. 12, 01108 Vilnius, Lithuania, EU
Received: 5 October 2012
Accepted: 4 January 2013
We propose a Markov jump process with the three-state herding interaction. We see our approach as an agent-based model for the financial markets. Under certain assumptions this agent-based model can be related to the stochastic description exhibiting sophisticated statistical features. Along with power-law probability density function of the absolute returns we are able to reproduce the fractured power spectral density, which is observed in the high-frequency financial market data. The given example of consistent agent-based and stochastic modeling will provide a background for further developments in the research of complex social systems.
PACS: 89.65.Gh – Economics; econophysics, financial markets, business and management / 02.50.Ga – Markov processes / 05.10.Gg – Stochastic analysis methods (Fokker-Planck, Langevin, etc.)
© EPLA, 2013
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