Complexity in Financial Markets: Modeling Psychological Behavior in Agent-Based Models and Order Book Models

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Springer Science & Business Media, Aug 28, 2013 - Science - 216 pages
Tools and methods from complex systems science can have a considerable impact on the way in which the quantitative assessment of economic and financial issues is approached, as discussed in this thesis. First it is shown that the self-organization of financial markets is a crucial factor in the understanding of their dynamics. In fact, using an agent-based approach, it is argued that financial markets’ stylized facts appear only in the self-organized state. Secondly, the thesis points out the potential of so-called big data science for financial market modeling, investigating how web-driven data can yield a picture of market activities: it has been found that web query volumes anticipate trade volumes. As a third achievement, the metrics developed here for country competitiveness and product complexity is groundbreaking in comparison to mainstream theories of economic growth and technological development. A key element in assessing the intangible variables determining the success of countries in the present globalized economy is represented by the diversification of the productive basket of countries. The comparison between the level of complexity of a country's productive system and economic indicators such as the GDP per capita discloses its hidden growth potential.
 

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Contents

1 Introduction
1
2 Stylized Facts
18
Part I AgentBased Modeling
26
3 Critical Review of AgentBased Models
27
4 A Minimal AgentBased Model and SelfOrganization of Financial Markets
55
Order Book and Data Analysis
87
Introduction and Main Statistical Evidences
89
6 Zero Intelligence Model for the Order Book Dynamics
98
9 Universal Relation Between Skewness and Kurtosis in Complex Dynamics
140
10 Web Queries Can Predict Stock Market Volumes
151
Part III A Metrics for the Economic Complexity
162
11 Theory of Economic Growth
163
12 Beyond Classical Theory of Economic Growth
171
13 A New Metric for the Competitiveness of Countries and the Quality of Products
189
A There Is More Than a Power Law in Zipf
205
About the Author
214

7 Evidences of Strategic Placements of Orders
113
8 Quantitative Analysis of Technical Trading
127

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