Self-organized percolation model for stock market fluctuations
AbstractIn the Cont–Bouchaud model [cond-mat/9712318] of stock markets, percolation clusters act as buying or selling investors and their statistics controls that of the price variations. Rather than fixing the concentration controlling each cluster connectivity artificially at or close to the critical value, we propose that clusters shatter and aggregate continuously as the concentration evolves randomly, reflecting the incessant time evolution of groups of opinions and market moods. By the mechanism of “sweeping of an instability” [Sornette, J. Phys. I 4, 209(1994)], this market model spontaneously exhibits reasonable power-law statistics for the distribution of price changes and accounts for the other important stylized facts of stock market price fluctuations.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 271 (1999)
Issue (Month): 3 ()
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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Clusters; Activity; Monte Carlo; Self-organized criticality; Power laws; Percolation;
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