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Emergence Of Power-Law And Two-Phase Behavior In Financial Market Fluctuations

Author

Listed:
  • ZVONKO KOSTANJČAR

    (University of Zagreb Faculty of Electrical Engineering and Computing Unska 3, HR-10000 Zagreb, Croatia)

  • BRANKO JEREN

    (University of Zagreb Faculty of Electrical Engineering and Computing Unska 3, HR-10000 Zagreb, Croatia)

Abstract

In this paper, we provide an insight into the emergence of power-law and two-phase behavior in the financial market fluctuations by defining an analytical model for time evolution of stock share prices. The defined model can exhibit bimodal behavior in the supply-demand structure of the market. Moreover, it differs from existing Ising-type models. It turns out that the constructed model is a solution of a thermodynamic limit of a Gibbs probability measure when the number of investors and the number of stock shares approaches the infinity. The energy functional of the Gibbs probability measure is derived from the Nash equilibrium of the underlying game.

Suggested Citation

  • Zvonko Kostanjčar & Branko Jeren, 2013. "Emergence Of Power-Law And Two-Phase Behavior In Financial Market Fluctuations," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 1-12.
    • Handle: RePEc:wsi:acsxxx:v:16:y:2013:i:01:n:s0219525913500082
    DOI: 10.1142/S0219525913500082
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    Citations

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    Cited by:

    1. Lin William Cong & Xi Li & Ke Tang & Yang Yang, 2021. "Crypto Wash Trading," Papers 2108.10984, arXiv.org.
    2. Didier SORNETTE, 2014. "Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based Models," Swiss Finance Institute Research Paper Series 14-25, Swiss Finance Institute.
    3. Begušić, Stjepan & Kostanjčar, Zvonko & Eugene Stanley, H. & Podobnik, Boris, 2018. "Scaling properties of extreme price fluctuations in Bitcoin markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 400-406.
    4. Stjepan Beguv{s}i'c & Zvonko Kostanjv{c}ar & H. Eugene Stanley & Boris Podobnik, 2018. "Scaling properties of extreme price fluctuations in Bitcoin markets," Papers 1803.08405, arXiv.org.

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