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TU Dresden » Faculty of Mechanical Science and Engineering » Institute for Materials Science » Chair of Materials Science and Nanotechnology

» presentations   » 2001.02

On clustering and interactions in a financial market

 G. Cuniberti , M. Porto, and E. H. Roman.

NATO Advanced Research Workshop on Application of Physics in Economic Modelling

2001.02; Prague, Czech Republic

The collective phenomena of a liquid market is characterized in terms of a particle system scenario. This physical analogy enables us to disentangle intrinsic features from purely stochastic ones. The latter are the result of environmental changes due to a `heat bath' acting on the many-asset system, quantitatively described in terms of a time dependent effective temperature. The remaining intrinsic properties can be widely investigated by applying standard methods of classical many body systems. As an example, we consider a large set of stocks traded at the NYSE and determine the corresponding asset-asset `interaction' potential, displaying a shape similar to the one obtained for DAX stocks [1]. In order to investigate in more detail the cluster structure suggested by the short distance behavior of the interaction potential, we perform a connectivity analysis of the spatial distribution of the particle system. In this way, we are able to draw conclusions on the intrinsic cluster persistency independently of the specific market conditions.

[1] G. Cuniberti and L. Matassini, Eur. J. Phys B 20, 561 (2001).

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