Non-equilibrium stochastic model for stock exchange market

Yup Kim; Ikhyun Kwon; Soon Hyung Yook

doi:10.1016/j.physa.2013.07.032

Non-equilibrium stochastic model for stock exchange market

Yup Kim, Ikhyun Kwon, Soon Hyung Yook

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

We study the effect of the topology of industrial relationship (IR) between the companies in a stock exchange market on the universal features in the market. For this we propose a stochastic model for stock exchange markets based on the behavior of technical traders. From the numerical simulations we measure the return distribution, P(R), and the autocorrelation function of the volatility, C(T), and find that the observed universal features in real financial markets are originated from the heterogeneity of IR network topology. Moreover, the heterogeneous IR topology can also explain Zipf-Pareto's law for the distribution of market value of equity in the real stock exchange markets.

Original language	English
Pages (from-to)	5907-5913
Number of pages	7
Journal	Physica A: Statistical Mechanics and its Applications
Volume	392
Issue number	23
DOIs	https://doi.org/10.1016/j.physa.2013.07.032
Publication status	Published - 1 Dec 2013

Bibliographical note

Funding Information:
This work was supported by the National Research Foundation of Korea (NRF) Grant funded by the Korean Government (MEST) (Grant No. 2011-0015257 ) and by the Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology (Nos. 2012R1A1A2007430 and NRF-2011-330-B00053 ).

Keywords

Econophysics
Financial network
Stochastic model for financial markets

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10.1016/j.physa.2013.07.032

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title = "Non-equilibrium stochastic model for stock exchange market",

abstract = "We study the effect of the topology of industrial relationship (IR) between the companies in a stock exchange market on the universal features in the market. For this we propose a stochastic model for stock exchange markets based on the behavior of technical traders. From the numerical simulations we measure the return distribution, P(R), and the autocorrelation function of the volatility, C(T), and find that the observed universal features in real financial markets are originated from the heterogeneity of IR network topology. Moreover, the heterogeneous IR topology can also explain Zipf-Pareto's law for the distribution of market value of equity in the real stock exchange markets.",

keywords = "Econophysics, Financial network, Stochastic model for financial markets",

author = "Yup Kim and Ikhyun Kwon and Yook, {Soon Hyung}",

note = "Funding Information: This work was supported by the National Research Foundation of Korea (NRF) Grant funded by the Korean Government (MEST) (Grant No. 2011-0015257 ) and by the Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology (Nos. 2012R1A1A2007430 and NRF-2011-330-B00053 ).",

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AU - Yook, Soon Hyung

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PY - 2013/12/1

Y1 - 2013/12/1

N2 - We study the effect of the topology of industrial relationship (IR) between the companies in a stock exchange market on the universal features in the market. For this we propose a stochastic model for stock exchange markets based on the behavior of technical traders. From the numerical simulations we measure the return distribution, P(R), and the autocorrelation function of the volatility, C(T), and find that the observed universal features in real financial markets are originated from the heterogeneity of IR network topology. Moreover, the heterogeneous IR topology can also explain Zipf-Pareto's law for the distribution of market value of equity in the real stock exchange markets.

AB - We study the effect of the topology of industrial relationship (IR) between the companies in a stock exchange market on the universal features in the market. For this we propose a stochastic model for stock exchange markets based on the behavior of technical traders. From the numerical simulations we measure the return distribution, P(R), and the autocorrelation function of the volatility, C(T), and find that the observed universal features in real financial markets are originated from the heterogeneity of IR network topology. Moreover, the heterogeneous IR topology can also explain Zipf-Pareto's law for the distribution of market value of equity in the real stock exchange markets.

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JO - Physica A: Statistical Mechanics and its Applications

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IS - 23

ER -

Non-equilibrium stochastic model for stock exchange market

Abstract

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Keywords

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