Network Topology and the Behaviour of Socially-Embedded Financial Markets

MARKET FLUCTUATIONS EXPLAINED BY DIVIDENDS AND INVESTOR NETWORKS

Advances in Complex Systems ◽

10.1142/s0219525917500072 ◽

2017 ◽

Vol 20 (08) ◽

pp. 1750007 ◽

Cited By ~ 2

Author(s):

MATTHEW OLDHAM

Keyword(s):

Stock Market ◽

Complex Systems ◽

Financial Markets ◽

Network Topology ◽

Network Science ◽

Agent Based ◽

Excess Volatility ◽

Artificial Stock Market ◽

Analytical Frameworks ◽

Insight Into

The inability of investors and academics to consistently predict, and understand the behavior of financial markets has forced the search for alternative analytical frameworks. Analyzing financial markets as complex systems is a framework that has demonstrated great promises, with the use of agent-based models (ABMs) and the inclusion of network science playing an important role in increasing the relevance of the framework. Using an artificial stock market created via an ABM, this paper provides a significant insight into the mechanisms that drive the returns in financial markets, including periods of elevated prices and excess volatility. The paper demonstrates that the network topology that investors form and the dividend policy of firms significantly affect the behavior of the market. However, if investors have a bias to following their neighbors then the topology becomes redundant. By successfully addressing these issues this paper helps refine and shape a variety of additional research tasks for the use of ABMs in uncovering the dynamics of financial markets.

Self-organizing Ising model of artificial financial markets with small-world network topology

EPL (Europhysics Letters) ◽

10.1209/0295-5075/101/18001 ◽

2013 ◽

Vol 101 (1) ◽

pp. 18001 ◽

Cited By ~ 6

Author(s):

Haijie Zhao ◽

Jie Zhou ◽

Anghui Zhang ◽

Guifeng Su ◽

Yi Zhang

Keyword(s):

Ising Model ◽

Financial Markets ◽

Network Topology ◽

Small World ◽

Small World Network ◽

Artificial Financial Markets ◽

Self Organizing