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Criticality and finite size effects in a simple realistic model of stock market

Damien Challet·Matteo Marsili
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Abstract

We discuss a simple model based on the Minority Game which reproduces the main stylized facts of anomalous fluctuations in finance. We present the analytic solution of the model in the thermodynamic limit and show that stylized facts arise only close to a line of critical points with non-trivial properties. By a simple argument, we show that, in Minority Games, the emergence of critical fluctuations close to the phase transition is governed by the interplay between the signal to noise ratio and the system size. These results provide a clear and consistent picture of financial markets as critical systems.

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Damien Challet, Matteo Marsili. 2002-12-04. Criticality and finite size effects in a simple realistic model of stock market. https://doi.org/10.1103/physreve.68.036132

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