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The co-evolutionary dynamics of directed network of spin market agents

Author

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  • Horváth, Denis
  • Kuscsik, Zoltán
  • Gmitra, Martin

Abstract

The spin market model [S. Bornholdt, Int. J. Mod. Phys. C 12 (2001) 667] is generalized by employing co-evolutionary principles, where strategies of the interacting and competitive traders are represented by local and global couplings between the nodes of dynamic directed stochastic network. The co-evolutionary principles are applied in the frame of Bak–Sneppen self-organized dynamics [P. Bak, K. Sneppen, Phys. Rev. Lett. 71 (1993) 4083] that includes the processes of selection and extinction actuated by the local (node) fitness. The local fitness is related to orientation of spin agent with respect to the instant magnetization. The stationary regime is formed due to the interplay of self-organization and adaptivity effects. The fat tailed distributions of log-price returns are identified numerically. The non-trivial model consequence is the evidence of the long time market memory indicated by the power-law range of the autocorrelation function of volatility with exponent smaller than one. The simulations yield network topology with broad-scale node degree distribution characterized by the range of exponents 1.3<γin<3 coinciding with social networks.

Suggested Citation

  • Horváth, Denis & Kuscsik, Zoltán & Gmitra, Martin, 2006. "The co-evolutionary dynamics of directed network of spin market agents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 780-788.
    • Handle: RePEc:eee:phsmap:v:369:y:2006:i:2:p:780-788
    DOI: 10.1016/j.physa.2006.01.067
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    Cited by:

    1. Stefan Bornholdt, 2021. "A q-spin Potts model of markets: Gain-loss asymmetry in stock indices as an emergent phenomenon," Papers 2112.06290, arXiv.org.
    2. Bornholdt, Stefan, 2022. "A q-spin Potts model of markets: Gain–loss asymmetry in stock indices as an emergent phenomenon," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 588(C).

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