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Self-organizing Ising model of financial markets

Listed author(s):
  • W.-X. Zhou
  • D. Sornette

    ()

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    We study a dynamical Ising-like model of agents' opinions (buy or sell) with learning, in which the coupling coefficients are re-assessed continuously in time according to how past external news (time-varying magnetic field) have explained realized market returns. By combining herding, the impact of external news and private information, we find that the stylized facts of financial markets are reproduced only when agents misattribute the success of news to predict return to herding effects, thereby providing positive feedbacks leading to the model functioning close to the Ising critical point. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2007

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    File URL: http://hdl.handle.net/10.1140/epjb/e2006-00391-6
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    Article provided by Springer & EDP Sciences in its journal The European Physical Journal B.

    Volume (Year): 55 (2007)
    Issue (Month): 2 (January)
    Pages: 175-181

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    Handle: RePEc:spr:eurphb:v:55:y:2007:i:2:p:175-181
    DOI: 10.1140/epjb/e2006-00391-6
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