Financial symmetry and moods in the market.
This paper studies how certain speculative transitions in financial markets can be ascribed to a symmetry break that happens in the collective decision making. Investors are assumed to be bounded rational, using a limited set of information including past price history and expectation on future divi...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Public Library of Science (PLoS)
2015-01-01
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| Series: | PLoS ONE |
| Online Access: | https://doi.org/10.1371/journal.pone.0118224 |
| _version_ | 1818985184556482560 |
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| author | Roberto Savona Maxence Soumare Jørgen Vitting Andersen |
| author_facet | Roberto Savona Maxence Soumare Jørgen Vitting Andersen |
| author_sort | Roberto Savona |
| collection | DOAJ |
| description | This paper studies how certain speculative transitions in financial markets can be ascribed to a symmetry break that happens in the collective decision making. Investors are assumed to be bounded rational, using a limited set of information including past price history and expectation on future dividends. Investment strategies are dynamically changed based on realized returns within a game theoretical scheme with Nash equilibria. In such a setting, markets behave as complex systems whose payoff reflect an intrinsic financial symmetry that guarantees equilibrium in price dynamics (fundamentalist state) until the symmetry is broken leading to bubble or anti-bubble scenarios (speculative state). We model such two-phase transition in a micro-to-macro scheme through a Ginzburg-Landau-based power expansion leading to a market temperature parameter which modulates the state transitions in the market. Via simulations we prove that transitions in the market price dynamics can be phenomenologically explained by the number of traders, the number of strategies and amount of information used by agents, all included in our market temperature parameter. |
| first_indexed | 2024-12-20T18:30:52Z |
| format | Article |
| id | doaj.art-117e480ce49640a1a380ff796e31b3c1 |
| institution | Directory Open Access Journal |
| issn | 1932-6203 |
| language | English |
| last_indexed | 2024-12-20T18:30:52Z |
| publishDate | 2015-01-01 |
| publisher | Public Library of Science (PLoS) |
| record_format | Article |
| series | PLoS ONE |
| spelling | doaj.art-117e480ce49640a1a380ff796e31b3c12022-12-21T19:30:03ZengPublic Library of Science (PLoS)PLoS ONE1932-62032015-01-01104e011822410.1371/journal.pone.0118224Financial symmetry and moods in the market.Roberto SavonaMaxence SoumareJørgen Vitting AndersenThis paper studies how certain speculative transitions in financial markets can be ascribed to a symmetry break that happens in the collective decision making. Investors are assumed to be bounded rational, using a limited set of information including past price history and expectation on future dividends. Investment strategies are dynamically changed based on realized returns within a game theoretical scheme with Nash equilibria. In such a setting, markets behave as complex systems whose payoff reflect an intrinsic financial symmetry that guarantees equilibrium in price dynamics (fundamentalist state) until the symmetry is broken leading to bubble or anti-bubble scenarios (speculative state). We model such two-phase transition in a micro-to-macro scheme through a Ginzburg-Landau-based power expansion leading to a market temperature parameter which modulates the state transitions in the market. Via simulations we prove that transitions in the market price dynamics can be phenomenologically explained by the number of traders, the number of strategies and amount of information used by agents, all included in our market temperature parameter.https://doi.org/10.1371/journal.pone.0118224 |
| spellingShingle | Roberto Savona Maxence Soumare Jørgen Vitting Andersen Financial symmetry and moods in the market. PLoS ONE |
| title | Financial symmetry and moods in the market. |
| title_full | Financial symmetry and moods in the market. |
| title_fullStr | Financial symmetry and moods in the market. |
| title_full_unstemmed | Financial symmetry and moods in the market. |
| title_short | Financial symmetry and moods in the market. |
| title_sort | financial symmetry and moods in the market |
| url | https://doi.org/10.1371/journal.pone.0118224 |
| work_keys_str_mv | AT robertosavona financialsymmetryandmoodsinthemarket AT maxencesoumare financialsymmetryandmoodsinthemarket AT jørgenvittingandersen financialsymmetryandmoodsinthemarket |