Expectation bubbles in a spin model of markets: Intermittency from frustration across scales

Details Expectation bubbles in a spin model of markets: Intermittency from frustration across scales Expectation bubbles in a spin model of markets: Intermittency from frustration across scales

2001-05-10

arxiv.org/abs/cond-mat/0105224v2

Int. J. Mod. Phys. C, Vol. 12, No. 5 (2001) 667-674

Physics

Condensed Matter

Statistical Mechanics

5 pages RevTeX, 5 figures eps, revised version

Scientific paper

10.1142/S0129183101001845

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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