Regensburg 2002 – scientific programme

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 18: Finanzm
ärkte und Risikomanagement II

AKSOE 18.3: Talk

Thursday, March 14, 2002, 10:30–11:00, H8

Expectation bubbles and crashes in a simple spin model of markets — •Stefan Bornholdt — Institut für Theoretische Physik, Universität Kiel, Leibnizstr. 15, D-24098 Kiel

A simple spin model of markets is studied which is based on two conflicting interactions: Each spin tends to imitate the strategic choices of its neighbor (buy or sell a certain stock), but also reacts to a global indicator (relative value of the stock). While the first coupling is a directed (ferromagnetic) coupling as in the Ising model, the second interaction is irrational, i.e. it only couples to the size of the relative evaluation (magnetization), thereby increasing the probability of a strategy change, with no preference for a particular choice. This model exhibits a metastable dynamics with intermittency and phases of chaotic dynamics [1]. It reproduces main observations of real economic markets as volatility clustering and power-law distributed returns with exponents beyond the Levy-regime [2].

[1] S. Bornholdt, Int. J. Mod. Phys. C, Vol. 12, No. 5 (2001) 667-674

[2] T. Kaizoji, Y. Fujiwara, and S. Bornholdt, to be published