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A threshold Potts model of financial markets

Paweł Sieczka ,  Janusz A. Hołyst 

Warsaw University of Technology, Faculty of Physics and Cent.of Exc.for Complex Systems Research, Koszykowa 75, Warszawa 00-662, Poland

Abstract

We proposed a model of interacting market agents based on the Potts spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of magnetization of the system. The model reproduces main stylized facts of real markets such as: fat-tailed distribution of returns, volatility clustering and a power-low decay of autocorrelation of absolute returns.

 

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Related papers

Presentation: Oral at 3 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych", by Paweł Sieczka
See On-line Journal of 3 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych"

Submitted: 2007-09-06 10:36
Revised:   2009-06-07 00:44