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Nonlinear fluctuation behaviors of complex voter financial price dynamics on small-world network

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Abstract

To simulate the price fluctuation dynamics of financial markets, a novel financial price model is developed by the voter dynamic system on the Watts-Strogtz small-world network and the random jump process. The voter system is a classical statistical physics system, which describes the dynamics of voters’ attitudes towards a certain topic in the mutual influence. The Watts-Strogtz small-world network is a special kind of complex networks, which can be used to study the transmission dynamics of different things in complex and real-world systems. The paper first attempts to use the voter dynamic system on the small-world network to reproduce the micro-mechanism of price fluctuations caused by the interaction among different investors in financial markets, where investors can potentially disseminate information and interact via additional long-distance contacts. Moreover, considering that external macro environments have the impact on price fluctuations in financial markets, this paper introduces the random jump process in the price model. The effectiveness of the proposed model can be verified by comparing price returns generated by the model with returns of several important stock indexes in terms of nonlinear fluctuation behaviors. First, some statistical behaviors of the fluctuation dynamics are explored, including distribution characteristics and autocorrelation. Moreover, based on the ensemble empirical mode decomposition method, multifractal behaviors and complexity behaviors of returns and the first three intrinsic mode functions are investigated. The empirical results show that the dynamical model can well simulate these nonlinear fluctuation behaviors of real markets.

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Acknowledgements

The authors were supported by the Fundamental Research Funds for the Central Universities, China, Grant No. 2019YJS190.

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  1. School of Science, Beijing Jiaotong University, Beijing, 100044, People’s Republic of China

    Guochao Wang, Shenzhou Zheng & Jun Wang

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  1. Guochao Wang
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  2. Shenzhou Zheng
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Wang, G., Zheng, S. & Wang, J. Nonlinear fluctuation behaviors of complex voter financial price dynamics on small-world network. Nonlinear Dyn 103, 2525–2545 (2021). https://doi.org/10.1007/s11071-021-06257-x

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