Transmission of information in financial systems
Abstract
One of the universal characteristic that evidence the analysis of financial-price data is a scale free distribution of returns for intra-day time scales. Different models have been proposed to explain these characteristics and can be divided in two different groups, physically motivated models based on the interaction of a large number of units and models based on multi agent interactions. Simple models based on physical systems that capture the essentials of a stock market have the inconvenience that some parameters have to be tuned externally. Here we propose a simple model for the propagation of information and formation of groups of opinion. The system self-organizes in groups of all sizes acting all together as selling or buying investors without the need of tuning externally any parameter. Our model displays power law distribution of returns as a result of group activity and transmission of information in good agreement with empirical data.Keywords
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