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A Mechanism for Pockets of Predictability in Complex Adaptive Systems

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  • Jorgen Vitting Andersen
  • Didier Sornette

Abstract

We document a mechanism operating in complex adaptive systems leading to dynamical pockets of predictability (``prediction days''), in which agents collectively take predetermined courses of action, transiently decoupled from past history. We demonstrate and test it out-of-sample on synthetic minority and majority games as well as on real financial time series. The surprising large frequency of these prediction days implies a collective organization of agents and of their strategies which condense into transitional herding regimes.

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  • Jorgen Vitting Andersen & Didier Sornette, 2004. "A Mechanism for Pockets of Predictability in Complex Adaptive Systems," Papers cond-mat/0410762, arXiv.org, revised Nov 2004.
    • Handle: RePEc:arx:papers:cond-mat/0410762
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