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Emergence of universal scaling in financial markets from mean-field dynamics


  • S. V. Vikram
  • Sitabhra Sinha


Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction dynamics between individual components is mediated by a global variable making the mean-field description exact. Using the example of financial markets, we show that asset price can be such a global variable with the critical role of coordinating the actions of agents who are otherwise independent. The resulting model accurately reproduces empirical properties such as the universal scaling of the price fluctuation and volume distributions, long-range correlations in volatility and multiscaling.

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  • S. V. Vikram & Sitabhra Sinha, 2010. "Emergence of universal scaling in financial markets from mean-field dynamics," Papers 1006.0628,
  • Handle: RePEc:arx:papers:1006.0628

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    Cited by:

    1. Takero Ibuki & Jun-ichi Inoue, 2010. "Response of double-auction markets to instantaneous Selling-Buying signals with stochastic Bid-Ask spread," Papers 1011.0748,, revised Mar 2011.
    2. Takero Ibuki & Jun-ichi Inoue, 2011. "Response of double-auction markets to instantaneous Selling–Buying signals with stochastic Bid–Ask spread," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 6(2), pages 93-120, November.
    3. D. Sornette, 2014. "Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based models," Papers 1404.0243,
    4. Sitabhra Sinha & Uday Kovur, 2013. "Uncovering the network structure of the world currency market: Cross-correlations in the fluctuations of daily exchange rates," Papers 1305.0239,

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