Journal
INTERNATIONAL JOURNAL OF MODERN PHYSICS C
Volume 12, Issue 5, Pages 667-674Publisher
WORLD SCIENTIFIC PUBL CO PTE LTD
DOI: 10.1142/S0129183101001845
Keywords
econophysics; dynamics of markets; statistical mechanics of spin models; order-disorder transitions; metastability; self-organization
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A simple spin model is studied, motivated by the dynamics of traders in a market, where expectation bubbles and crashes occur. The dynamics is governed by interactions, which are frustrated across different scales: while ferromagnetic couplings connect each spin to its local neighborhood, an additional coupling relates each spin to the global magnetization. This new coupling is allowed to be anti-ferromagnetic. The resulting frustration causes a metastable dynamics with intermittency and phases of chaotic dynamics. The model reproduces main observations of real economic markets as power-law distributed returns and clustered volatility.
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