“Slimming” of power-law tails by increasing market returns

“Slimming” of power law tails by increasing market returns

We introduce a simple generalization of rational bubble models which removes the fundamental problem discovered by [20] that the distribution of returns is a power law with exponent less than 1, in contradiction with empirical data. The idea is that the price fluctuations associated with bubbles must on average grow with the mean market return r. When r is larger than the discount rate rδ , the...

Self-organized “slimming” of power law tails by increasing market returns

We introduce a simple generalization of rational bubble models which removes the fundamental problem discovered by [Lux and Sornette, 1999] that the distribution of returns is a power law with exponent less than 1, in contradiction with empirical data. Our model predicts that, the higher is the market remuneration above the discount rate, the thinner is the tail of price returns but the larger ...

Collusive Market Structure Under Learning-By-Doing and Increasing Returns

Power Laws of Wealth, Market Order Volumes and Market Returns

Using the Generalised Lotka Volterra (GLV) model adapted to deal with muti agent systems we can investigate economic systems from a general viewpoint and obtain generic features common to most economies. Assuming only weak generic assumptions on capital dynamics, we are able to obtain very specific predictions for the distribution of social wealth. First, we show that in a ’fair’ market, the we...

Increasing market efficiency: Evolution of cross-correlations of stock returns

We analyse the temporal changes in the cross correlations of returns on the New York Stock Exchange. We show that lead-lag relationships between daily returns of stocks vanished in less than twenty years. We have found that even for high frequency data the asymmetry of time dependent cross-correlation functions has a decreasing tendency, the position of their peaks are shifted towards the origi...