IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1205.2915.html
   My bibliography  Save this paper

Universality class of balanced flows with bottlenecks: granular flows, pedestrian fluxes and financial price dynamics

Author

Listed:
  • Daniel R. Parisi
  • Didier Sornette
  • Dirk Helbing

Abstract

We propose and document the evidence for an analogy between the dynamics of granular counter-flows in the presence of bottlenecks or restrictions and financial price formation processes. Using extensive simulations, we find that the counter-flows of simulated pedestrians through a door display many stylized facts observed in financial markets when the density around the door is compared with the logarithm of the price. The stylized properties are present already when the agents in the pedestrian model are assumed to display a zero-intelligent behavior. If agents are given decision-making capacity and adapt to partially follow the majority, periods of herding behavior may additionally occur. This generates the very slow decay of the autocorrelation of absolute return due to an intermittent dynamics. Our finding suggest that the stylized facts in the fluctuations of the financial prices result from a competition of two groups with opposite interests in the presence of a constraint funneling the flow of transactions to a narrow band of prices.

Suggested Citation

  • Daniel R. Parisi & Didier Sornette & Dirk Helbing, 2012. "Universality class of balanced flows with bottlenecks: granular flows, pedestrian fluxes and financial price dynamics," Papers 1205.2915, arXiv.org.
    • Handle: RePEc:arx:papers:1205.2915
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1205.2915
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1205.2915. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.