A statistical physics perspective on criticality in financial markets
Stock markets are complex systems exhibiting collective phenomena and particular features such as synchronization, fluctuations distributed as power-laws, non-random structures and similarity to neural networks. Such specific properties suggest that markets operate at a very special point. Financial markets are believed to be critical by analogy to physical systems but few statistically founded evidence have been given. Through a data-based methodology and comparison to simulations inspired by statistical physics of complex systems, we show that the Dow Jones and indices sets are not rigorously critical. However, financial systems are closer to the criticality in the crash neighborhood.
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.:
- D. Sornette, 2003. "Critical Market Crashes," Papers cond-mat/0301543, arXiv.org.
- Thomas Bury, 2012. "Statistical pairwise interaction model of stock market," Papers 1206.4420, arXiv.org, revised Jan 2014.
- W.-X. Zhou & D. Sornette, 2007. "Self-organizing Ising model of financial markets," The European Physical Journal B - Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 55(2), pages 175-181, 01.
- Y. Shapira & D. Y. Kenett & E. Ben-Jacob, 2009. "The Index cohesive effect on stock market correlations," The European Physical Journal B - Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 72(4), pages 657-669, December.
- Iacopo Mastromatteo & Matteo Marsili, 2011. "On the criticality of inferred models," Papers 1102.1624, arXiv.org, revised Sep 2011.
- Vandewalle, N. & Boveroux, Ph. & Minguet, A. & Ausloos, M., 1998. "The crash of October 1987 seen as a phase transition: amplitude and universality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 255(1), pages 201-210.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1310.2446. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
If references are entirely missing, you can add them using this form.