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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 18: Financial Markets and Risk Management I

SOE 18.8: Vortrag

Donnerstag, 17. März 2011, 12:15–12:30, GÖR 226

Statistical Mechanics of a spin stock market model — •Sebastian Krause and Stefan Bornholdt — Institut für Theoretische Physik, Universität Bremen, Otto-Hahn-Allee, 28359 Bremen

The prices of stocks and other financial assets show a typical behavior, known as stylized facts. One example is the power law distribution of the logarithmic absolute returns, wich means that big changes are more common than in a Gaussian random walk, hence there is more risk.

For a better understanding of the emergence of stylized facts from local behavior, the study of agent based models with specific statistical properties is reasonable. We here investigate a magnetic spin model, which is known to reproduce several stylized facts [1]. We identify the mechanism, which leads to power law distributed returns, especially considering finite size effects, and find a crossover in the model dynamics. Our findings also shed some light on the fact that power laws can be found for different time scales with increasing volatility (hence risk) for larger times, reflecting the same property in real markets.

[1] S. Bornholdt, Expectation bubbles in a spin model of markets: Intermittency from frustration across scales, Int. J. Mod. Phys. C, Vol. 12, No. 5 (2001) 667-674; T. Kaizoji, S. Bornholdt, Y. Fujiwara, Dynamics of price and trading volume in a spin model of stock markets with heterogeneous agents, Physica A 316 (2002) 441-452