Herding, minority game, market clearing and efficient markets in a simple spin model framework

0474986 - ÚTIA 2018 RIV NL eng J - Journal Article
Krištoufek, Ladislav - Vošvrda, Miloslav
Herding, minority game, market clearing and efficient markets in a simple spin model framework.
Communications in Nonlinear Science and Numerical Simulation. Roč. 54, č. 1 (2018), s. 148-155. ISSN 1007-5704. E-ISSN 1878-7274
R&D Projects: GA ČR(CZ) GBP402/12/G097
EU Projects: European Commission(XE) 612955 - FINMAP
Institutional support: RVO:67985556
Keywords : Ising model * Efficient market hypothesis * Monte Carlo simulation
OECD category: Applied Economics, Econometrics
Impact factor: 3.967, year: 2018
http://library.utia.cas.cz/separaty/2017/E/kristoufek-0474986.pdf

We present a novel approach towards the financial Ising model. Most studies utilize the model to find settings which generate closely mimicking the financial stylized facts such a fat tails, volatility clustering and persistence, and others. Working with the Ising model, we are able to present nicely interpretable results as the model is based on only two parameters. We show that in fact market frictions (to a certain level) and herding behavior of the market participants do not go against market efficiency but what is more, they are needed for the markets to be efficient.
Permanent Link: http://hdl.handle.net/11104/0272091