Opinion formation model for markets with a social temperature and fear
AbstractIn the spirit of behavioral finance, we study the process of opinion formation among investors using a variant of the 2D Voter Model with a tunable social temperature. Further, a feedback acting on the temperature is introduced, such that social temperature reacts to market imbalances and thus becomes time dependent. In this toy market model, social temperature represents nervousness of agents towards market imbalances representing speculative risk. We use the knowledge about the discontinuous Generalized Voter Model phase transition to determine critical fixed points. The system exhibits metastable phases around these fixed points characterized by structured lattice states, with intermittent excursions away from the fixed points. The statistical mechanics of the model is characterized and its relation to dynamics of opinion formation among investors in real markets is discussed.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1212.4751.
Date of creation: Dec 2012
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Publication status: Published in Phys. Rev. E 86, 056106 (2012)
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
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- Krause, Sebastian M. & Bornholdt, Stefan, 2013. "Spin models as microfoundation of macroscopic market models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(18), pages 4048-4054.
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