On the nature of the stock market : simulations and experiments
department or school: Science, Faculty of
department or school: Physics and Astronomy, Department of
data provider: DSpace
degree campus: UBCV
creator: Blok, Hendrik J.
issued: 2009-07-21T21:33:39Z
issued: 2000
related degree: Doctor of Philosophy - PhD
degree grantor: University of British Columbia
description: Over the last few years there has been a surge of activity within the physics community in the emerging field of Econophysics—the study of economic systems from a physicist's perspective. Physicists tend to take a different view than economists and other social scientists, being interested in such topics as phase transitions and fluctuations. In this dissertation two simple models of stock exchange are developed and simulated numerically. The first is characterized by centralized trading with a market maker. Fluctuations are driven by a stochastic component in the agents' forecasts. As the scale of the fluctuations is varied a critical phase transition is discovered. Unfortunately, this model is unable to generate realistic market dynamics. The second model discards the requirement of centralized trading. In this case the stochastic driving force is Gaussian-distributed "news events" which are public knowledge. Under variation of the control parameter the model exhibits two phase transitions: both a first- and a second-order (critical). The decentralized model is able to capture many of the interesting properties observed in empirical markets such as fat tails in the distribution of returns, a brief memory in the return series, and long-range correlations in volatility. Significantly, these properties only emerge when the parameters are tuned such that the model spans the critical point. This suggests that real markets may operate at or near a critical point, but is unable to explain why this should be. This remains an interesting open question worth further investigation. One of the main points of the thesis is that these empirical phenomena are not present in the stochastic driving force, but emerge endogenously from interactions between agents. Further, they emerge despite the simplicity of the modeled agents; suggesting complex market dynamics do not arise from the complexity of individual investors but simply from interactions between (even simple) investors. A…
aggregated CHO: https://circle.library.ubc.ca/rest/handle/2429/11108
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note: ON THE NATURE OF THE STOCK MARKET: SIMULATIONS AND EXPERIMENTS by Hendrik J . Blok B . S c , University of British Columbia, 1993 M . S c , University of British Columbia, 1995 A DISSERTATION S U B M I T T E D IN P A R T I A L F U L F I L L M E N T O F T H E R E Q U I R E M E N T S F O R T H E D E G R E E OF Doctor of Philosophy in T H E F A C U L T Y - O F G R A D U A T E STUDIES (Department of Physics and Astronomy) We accept this dissertation as conforming to the required standard T H E U N I V E R S I T Y O F BRITISH C O L U M B I A November 2000 © Hendrik J . Blok, 2000 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of P t ^ C S /WO A^JKotpKy The University of British Columbia Vancouver, Canada D a t e 5erT. ^ ^OOO DE-6 (2/88) Abstract Over the last few years there has been a surge of activity within the physics com-munity in the emerging field of Econophysics—the study of economic systems from a physicist's perspective. Physicists tend to take a different view than economists and other social scientists, being interested in such topics as phase transitions and fluctuations. In this dissertation two simple models of stock exchange are developed and simulated numerically. The first is characterized by centralized trading with a mar-ket maker. Fluctuations are driven by a stochastic component in the agents' fore-casts. As the scale of the fluctuations is varied a critical phase transition is discov-ered. Unfortunately, this model is unable to generate realistic market dynamics. The second model d…
has type: Thesis/Dissertation
date issued: 2000-11
is shown at: 10.14288/1.0085499
language: eng
degree discipline: Physics
provider: Vancouver : University of British Columbia Library
publisher: University of British Columbia
rights: For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
scholar level: Graduate
type: Text
identifier URI: http://hdl.handle.net/2429/11108