Naslov
Stochastic Model of Financial Markets Reproducing Scaling and Memory in Volatility Return Intervals

Autori
Gontis, Vygintas ; Havlin, Shlomo ; Kononovicius, A. ; Podobnik, Boris ; Stanley, H. E.

Izvornik
Physica. A, Statistical mechanics and its applications (0378-4371) 462 (2016); 1091-1102

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
Stochastic mideling ; finance

Sažetak
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive macroscopic equations based on the microscopic herding interactions of agents and find that they are able to reproduce various stylized facts of different markets and different assets with the same set of model parameters. We show that the power-law properties and the scaling of return intervals and other financial variables have a similar origin and could be a result of a general class of nonlinear stochastic differential equations derived from amaster equation of an agent system that is coupled by herding interactions. Specifically, we find that this approach enables us to recover the volatility return interval statistics as well as volatility probabilityandspectraldensitiesfortheNYSEandFOREXmarkets, fordifferentassets, and fordifferenttime-scales.WefindalsothatthehistoricalS&P500monthlyseriesexhibitsthe same volatility return interval properties recovered by our proposed model. Our statistical results suggest that human herding is so strong that it persists even when other evolving fluctuations perturbate the financial system

Izvorni jezik
Engleski

Znanstvena područja
Fizika, Ekonomija

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