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Self-organizing Ising model of financial markets

  • Topical Issue on Trends in Econophysics
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Abstract.

We study a dynamical Ising-like model of agents' opinions (buy or sell) with learning, in which the coupling coefficients are re-assessed continuously in time according to how past external news (time-varying magnetic field) have explained realized market returns. By combining herding, the impact of external news and private information, we find that the stylized facts of financial markets are reproduced only when agents misattribute the success of news to predict return to herding effects, thereby providing positive feedbacks leading to the model functioning close to the Ising critical point.

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Authors and Affiliations

  1. School of Business and Research Center of Systems Engineering, East China University of Science and Technology, Shanghai, 200237, P.R. China

    W.-X. Zhou

  2. Department of Management, Technology and Economics, ETH Zurich, 8032, Zurich, Switzerland

    D. Sornette

Authors
  1. W.-X. Zhou
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  2. D. Sornette
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Correspondence to D. Sornette.

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Zhou, WX., Sornette, D. Self-organizing Ising model of financial markets. Eur. Phys. J. B 55, 175–181 (2007). https://doi.org/10.1140/epjb/e2006-00391-6

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  • DOI: https://doi.org/10.1140/epjb/e2006-00391-6

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