dorsal/arxiv
View SchemaMarket Polarization in Presence of Individual Choice Volatility
| Authors | Sitabhra Sinha, Srinivas Raghavendra |
|---|---|
| Categories | |
| ArXiv ID | physics/0607071 |
| URL | https://arxiv.org/abs/physics/0607071 |
Abstract
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over the other. From the point of view of conventional economic theory, such events are thought to reflect the arrival of ``external news'' that justifies the observed behavior. However, empirical observations of the events leading up to such market phases, as well events occurring during the lifetime of such a phase, have often failed to find significant correlation between news from outside the market and the behavior of the agents comprising the market. In this paper, we explore the alternative hypothesis that the occurrence of such market polarizations are due to interactions amongst the agents in the market, and not due to any influence external to it. In particular, we present a model where the market (i.e., the aggregate behavior of all the agents) is observed to become polarized even though individual agents regularly change their actions (buy or sell) on a time-scale much shorter than that of the market polarization phase.
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"abstract": "Financial markets are subject to long periods of polarized behavior, such as\nbull-market or bear-market phases, in which the vast majority of market\nparticipants seem to almost exclusively choose one action (between buying or\nselling) over the other. From the point of view of conventional economic\ntheory, such events are thought to reflect the arrival of ``external news\u0027\u0027\nthat justifies the observed behavior. However, empirical observations of the\nevents leading up to such market phases, as well events occurring during the\nlifetime of such a phase, have often failed to find significant correlation\nbetween news from outside the market and the behavior of the agents comprising\nthe market. In this paper, we explore the alternative hypothesis that the\noccurrence of such market polarizations are due to interactions amongst the\nagents in the market, and not due to any influence external to it. In\nparticular, we present a model where the market (i.e., the aggregate behavior\nof all the agents) is observed to become polarized even though individual\nagents regularly change their actions (buy or sell) on a time-scale much\nshorter than that of the market polarization phase.",
"arxiv_id": "physics/0607071",
"authors": [
"Sitabhra Sinha",
"Srinivas Raghavendra"
],
"categories": [
"physics.soc-ph",
"cond-mat.other"
],
"title": "Market Polarization in Presence of Individual Choice Volatility",
"url": "https://arxiv.org/abs/physics/0607071"
},
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