Regensburg 2010 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 23: Financial Markets and Risk Management III

SOE 23.3: Talk

Friday, March 26, 2010, 11:15–11:45, H44

How to Characterize Trend Switching Processes in Financial Markets — •Tobias Preis^1,2,3, Johannes J. Schneider², and H. Eugene Stanley¹ — ¹Center for Polymer Studies, Department of Physics, 590 Commonwealth Avenue, Boston, Massachusetts 02215, USA — ²Department of Physics, Mathematics, and Computer Science, Johannes Gutenberg University of Mainz, Staudinger Weg 7, 55128 Mainz, Germany — ³Artemis Capital Asset Management GmbH, Gartenstr. 14, 65558 Holzheim, Germany

Financial market fluctuations are characterized by many abrupt switchings on various time scales from increasing trends to decreasing trends---and vice versa. We ask whether these ubiquitous switching processes have quantifiable features analogous to those present in phase transitions, and find striking scale-free behavior of the time intervals between transactions both before and after the switching occurs. We interpret our findings as being consistent with time-dependent collective behavior of financial market participants. We test the possible universality of our result by performing a parallel analysis of transaction volume fluctuations.