Physics – Condensed Matter – Statistical Mechanics
Scientific paper
2001-11-19
Physics
Condensed Matter
Statistical Mechanics
5 pages, 4 figures (two-column format, revtex)
Scientific paper
Scale-free distributions and correlation functions found in financial data are reminiscent of the scale invariance of physical observables in the vicinity of a critical point. Here, we present empirical evidence for a transition phenomenon, accompanied by a symmetry breaking, in the investors' demand for stocks. We study the volume imbalance $\Omega$ -- difference between the number of shares traded in buyer-initiated and seller-initiated trades in a time interval $\Delta t$ -- conditioned on $\Sigma$ which is defined as the local first moment of $\Omega$ in $\Delta t$. We find that the conditional distribution $P(\Omega | \Sigma)$ undergoes a qualitative change in behavior as $\Sigma$ increases beyond a critical threshold $\Sigma_c$. For $\Sigma <\Sigma_c$, $P(\Omega|\Sigma)$ displays a maximum at $\Omega=0$, i.e., trades in $\Delta t$ are equally likely to be buyer initiated or seller initiated. For $\Sigma > \Sigma_c$, $\Omega=0$ becomes a local minimum and two new maxima $\Omega_{+}$ and $\Omega_{-}$ appear at non-zero values of $\Omega$, i.e., trades in $\Delta t$ are either predominantly buyer initiated or predominantly seller initiated. We interpret these results using a Langevin equation with multiplicative noise.
Gopikrishnan Parameswaran
Plerou Vasiliki
Stanley Eugene H.
No associations
LandOfFree
Symmetry Breaking in Stock Demand does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Symmetry Breaking in Stock Demand, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Symmetry Breaking in Stock Demand will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-274794