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A q-spin Potts model of markets: Gain–loss asymmetry in stock indices as an emergent phenomenon

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  • Bornholdt, Stefan

Abstract

Spin models of markets inspired by physics models of magnetism, as the Ising model, allow for the study of the collective dynamics of interacting agents in a market. The number of possible states has been mostly limited to two (buy or sell) or three options. However, herding effects of competing stocks and the collective dynamics of a whole market may escape our reach in the simplest models. Here I study a q-spin Potts model version of a simple Ising market model to represent the dynamics of a stock market index in a spin model. As a result, a self-organized gain–loss asymmetry in the time series of an index variable composed of stocks in this market is observed.

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  • Bornholdt, Stefan, 2022. "A q-spin Potts model of markets: Gain–loss asymmetry in stock indices as an emergent phenomenon," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 588(C).
    • Handle: RePEc:eee:phsmap:v:588:y:2022:i:c:s0378437121008384
    DOI: 10.1016/j.physa.2021.126565
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    1. Akın, Hasan & Ulusoy, Suleyman, 2023. "A new approach to studying the thermodynamic properties of the q-state Potts model on a Cayley tree," Chaos, Solitons & Fractals, Elsevier, vol. 174(C).

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