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

Stefan Bornholdt
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Abstract

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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Stefan Bornholdt. 2001-05-16. Expectation bubbles in a spin model of markets: Intermittency from frustration across scales. https://doi.org/10.1142/s0129183101001845

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