This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Power-laws in economics and finance: some ideas from physics

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jean-Philippe Bouchaud (Science & Finance, Capital Fund Management, CEA Saclay;)
Abstract

We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments distribution and the decay of the volatility correlations are rather robust and suggest universality. However, many of the models that appear naturally (for example, to account for the distribution of wealth) contain some multiplicative noise, which generically leads to *non universal exponents*. Recent progress in the empirical study of the volatility suggests that the volatility results from some sort of multiplicative cascade. A convincing `microscopic' (i.e. trader based) model that explains this observation is however not yet available. It would be particularly important to understand the relevance of the pseudo-geometric progression of natural human time scales on the long range nature of the volatility correlations.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cfm.fr/papers/0008103.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Science & Finance, Capital Fund Management in its series Science & Finance (CFM) working paper archive with number 500023.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Aug 2000
Date of revision:
Publication status: Published in Quantitative Finance, proccedings of the 2000 Santa Fe conference
Handle: RePEc:sfi:sfiwpa:500023

Contact details of provider:
Postal: 6 boulevard Haussmann, 75009 Paris, FRANCE
Phone: +33.1.4949.5949
Fax: +33.1.4770.1740
Email:
Web page: http://www.science-finance.fr/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Marc Potters).

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. J. Doyne Farmer, 1999. "Physicists Attempt to Scale the Ivory Towers of Finance," Working Papers 99-10-073, Santa Fe Institute.
  2. Rama Cont & Marc Potters & Jean-Philippe Bouchaud, 1997. "Scaling in stock market data: stable laws and beyond," Quantitative Finance Papers cond-mat/9705087, arXiv.org. [Downloadable!]
  3. Rama Cont & Marc Potters & Jean-Philippe Bouchaud, 1997. "Scaling in stock market data: stable laws and beyond," Science & Finance (CFM) working paper archive 9705087, Science & Finance, Capital Fund Management. [Downloadable!]
  4. Hideaki Aoyama & Yuichi Nagahara & Mitsuhiro P. Okazaki & Wataru Souma & Hideki Takayasu & Misako Takayasu, 2000. "Pareto's Law for Income of Individuals and Debt of Bankrupt Companies," Quantitative Finance Papers cond-mat/0006038, arXiv.org. [Downloadable!]
  5. Iori, Giulia, 2002. "A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions," Journal of Economic Behavior & Organization, Elsevier, vol. 49(2), pages 269-285, October. [Downloadable!] (restricted)
    Other versions:
  6. Irene Giardina & Jean-Philippe Bouchaud & Marc Mezard, 2000. "Population dynamics in a random environment," Science & Finance (CFM) working paper archive 500025, Science & Finance, Capital Fund Management. [Downloadable!]
  7. J. Doyne Farmer, 1998. "Market Force, Ecology, and Evolution," Research in Economics 98-12-117e, Santa Fe Institute. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jean Pierre Nadal & Denis Phan & Mirta B. Gordan & Jean Vannimenus, 2003. "Monopoly Market with Externality: an Analysis with Statistical Physics and ACE," Computational Economics 0312002, EconWPA. [Downloadable!]
  2. Denis Phan & Stephane Pajot & Jean-Pierre Nadal, 2003. "The Monopolist's Market with Discrete Choices and Network Externality Revisited: Small-Worlds, Phase Transition and Avalanches in an ACE Framework," Computing in Economics and Finance 2003 150, Society for Computational Economics. [Downloadable!]
  3. Jean-Pierre Nadal & Denis Phan∥ & Mirta B. Gordon & Jean Vannimenus, 2005. "Multiple equilibria in a monopoly market with heterogeneous agents and externalities," Quantitative Finance, Taylor and Francis Journals, vol. 5(6), pages 557-568, December. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? Want to help out with this project? Look for volunteer opportunities.

This page was last updated on 2009-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.