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Structurally Dynamic Spin Market Networks

Author

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  • DENIS HORVÁTH

    (Department of Theoretical Physics and Astrophysics, Šafárik University, Park Angelinum 9, 040 01 Košice, Slovak Republic)

  • ZOLTÁN KUSCSIK

    (Department of Theoretical Physics and Astrophysics, Šafárik University, Park Angelinum 9, 040 01 Košice, Slovak Republic)

Abstract

The agent-based model of stock price dynamics on a directed evolving complex network is suggested and studied by direct simulation. The stationary regime is maintained as a result of the balance between the extremal dynamics, adaptivity of strategic variables and reconnection rules. The inherent structure of node agent "brain" is modeled by a recursive neural network with local and global inputs and feedback connections. For specific parametric combination the complex network displays small-world phenomenon combined with scale-free behavior. The identification of a local leader (network hub, agent whose strategies are frequently adapted by its neighbors) is carried out by repeated random walk process through network. The simulations show empirically relevant dynamics of price returns and volatility clustering. The additional emerging aspects of stylized market statistics are Zipfian distributions of fitness.

Suggested Citation

  • Denis Horváth & Zoltán Kuscsik, 2007. "Structurally Dynamic Spin Market Networks," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 18(08), pages 1361-1374.
    • Handle: RePEc:wsi:ijmpcx:v:18:y:2007:i:08:n:s0129183107011388
    DOI: 10.1142/S0129183107011388
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    References listed on IDEAS

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    1. Mantegna,Rosario N. & Stanley,H. Eugene, 2007. "Introduction to Econophysics," Cambridge Books, Cambridge University Press, number 9780521039871, November.
    2. Tél, Tamás & Vollmer, Jürgen & Mátyás, László, 2003. "Comments on the paper ‘Particles, maps and irreversible thermodynamics’ by E.G.D. Cohen, L. Rondoni, Physica A 306 (2002) 117," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 323-326.
    3. ., 2006. "Physical and Social Indicators," Chapters, in: Middle East Oil Exporters, chapter 5, Edward Elgar Publishing.
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    Cited by:

    1. D. Sornette, 2014. "Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based models," Papers 1404.0243, arXiv.org.
    2. Didier SORNETTE, 2014. "Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based Models," Swiss Finance Institute Research Paper Series 14-25, Swiss Finance Institute.

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