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The role of driving parameters of the threestate Ising model on the stability of the reconstruction of financial market phenomena 
Jan A. Lipski , Ryszard Kutner 
Warsaw University, Faculty of Physics, Hoża 69, Warszawa 00681, Poland 
Abstract 
The threestate G. Iori model of heteroagents placed in sites of a planar square lattice in the version has been modified. We model the increase of herding behaviour by simulating the altering trust of an agent to neighbour one: the trust increases if the price change has been foreseen by the neighbour correctly and decreases  if foreseen incorrectly. The agents base their decisions on looking at both their neighbours' advice and the fundamental price of the asset. The fundamental behaviour switches on periodically. The model reconstructs the following real market phenomena (stylized facts): volatility clustering, fat tail log return distribution and the power law decay of the volatility (absolute value of log returns) autocorrelation function over time. The latter corresponds to the real market empirical data supplied with high accuracy. 
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Presentation: Poster at 6 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych", by Jan A. Lipski Submitted: 20120114 09:03 Revised: 20120118 22:28 