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Self-organized Speculation Game for the spontaneous emergence of financial stylized facts

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  • Katahira, Kei
  • Chen, Yu
  • Akiyama, Eizo

Abstract

We sophisticate the Speculation Game to relax the need for rigorous tuning of a part of parameters for the emergence of characteristic statistics of price returns. Named as Self-organized Speculation Game (SOSG), thanks to the concept of the Bak–Tang–Wiesenfeld (BTW) sandpile model, the model can spontaneously adjust the number of market participants during the process of reaching the quasi-critical state. While the original Speculation Game’s high reproducibility of financial stylized facts is maintained, the behavioral characteristics of this modified model, such as the dynamics of system size and the observations of power-law phenomena, strongly resemble those of the BTW model. The market size is evolutionally settled with fluctuations within a certain range, similar to the total sand grains behave in the sandpile model. SOSG infers the possibility that, in the real financial markets, it could be the self-organized quasi-criticality which works behind the spontaneous emergence of universal financial stylized facts.

Suggested Citation

  • Katahira, Kei & Chen, Yu & Akiyama, Eizo, 2021. "Self-organized Speculation Game for the spontaneous emergence of financial stylized facts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 582(C).
    • Handle: RePEc:eee:phsmap:v:582:y:2021:i:c:s0378437121005008
    DOI: 10.1016/j.physa.2021.126227
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