Specialization of strategies and herding behavior of trading firms in a financial market

The understanding of complex social or economic systems is an important scientific challenge. Here we present a comprehensive study of the Spanish Stock Exchange showing that most financial firms trading in that market are characterized by a resulting strategy and can be classified in groups of firms with different specialization. Few large firms overally act as trending firms whereas many heterogeneous firm act as reversing firms. The herding properties of these two groups are markedly different and consistently observed over a four-year period of trading.Comment: 8 pages, 5 figure

Dissecting financial markets: Sectors and states

By analyzing a large data set of daily returns with data clustering technique, we identify economic sectors as clusters of assets with a similar economic dynamics. The sector size distribution follows Zipf's law. Secondly, we find that patterns of daily market-wide economic activity cluster into classes that can be identified with market states. The distribution of frequencies of market states shows scale-free properties and the memory of the market state process extends to long times ($\sim 50$ days). Assets in the same sector behave similarly across states. We characterize market efficiency by analyzing market's predictability and find that indeed the market is close to being efficient. We find evidence of the existence of a dynamic pattern after market's crashes.Comment: 6 pages 4 figures. Additional information available at http://www.sissa.it/dataclustering/fin

Anomalous diffusion and Tsallis statistics in an optical lattice

We point out a connection between anomalous quantum transport in an optical lattice and Tsallis' generalized thermostatistics. Specifically, we show that the momentum equation for the semiclassical Wigner function that describes atomic motion in the optical potential, belongs to a class of transport equations recently studied by Borland [PLA 245, 67 (1998)]. The important property of these ordinary linear Fokker--Planck equations is that their stationary solutions are exactly given by Tsallis distributions. Dissipative optical lattices are therefore new systems in which Tsallis statistics can be experimentally studied.Comment: 4 pages, 1 figur

Long-range memory model of trading activity and volatility

Earlier we proposed the stochastic point process model, which reproduces a variety of self-affine time series exhibiting power spectral density S(f) scaling as power of the frequency f and derived a stochastic differential equation with the same long range memory properties. Here we present a stochastic differential equation as a dynamical model of the observed memory in the financial time series. The continuous stochastic process reproduces the statistical properties of the trading activity and serves as a background model for the modeling waiting time, return and volatility. Empirically observed statistical properties: exponents of the power-law probability distributions and power spectral density of the long-range memory financial variables are reproduced with the same values of few model parameters.Comment: 12 pages, 5 figure

A new look inside Planetary Nebula LoTr 5: A long-period binary with hints of a possible third component

LoTr 5 is a planetary nebula with an unusual long-period binary central star. As far as we know, the pair consists of a rapidly rotating G-type star and a hot star, which is responsible for the ionization of the nebula. The rotation period of the G-type star is 5.95 days and the orbital period of the binary is now known to be $\sim$2700 days, one of the longest in central star of planetary nebulae. The spectrum of the G central star shows a complex H$\alpha$ double-peaked profile which varies with very short time scales, also reported in other central stars of planetary nebulae and whose origin is still unknown. We present new radial velocity observations of the central star which allow us to confirm the orbital period for the long-period binary and discuss the possibility of a third component in the system at $\sim$129 days to the G star. This is complemented with the analysis of archival light curves from SuperWASP, ASAS and OMC. From the spectral fitting of the G-type star, we obtain a effective temperature of $T_{\rm eff}$ = 5410$\pm$250 K and surface gravity of $\log g$ = 2.7$\pm$0.5, consistent with both giant and subgiant stars. We also present a detailed analysis of the H$\alpha$ double-peaked profile and conclude that it does not present correlation with the rotation period and that the presence of an accretion disk via Roche lobe overflow is unlikely.Comment: 12 pages, 12 figures, accepted for publication in MNRA

Edwards-Wilkinson surface over a spherical substrate: 1/f1/f noise in the height fluctuations

We study the steady state fluctuations of an Edwards-Wilkinson type surface with the substrate taken to be a sphere. We show that the height fluctuations on circles at a given latitude has the effective action of a perfect Gaussian $1/f$ noise, just as in the case of fixed radius circles on an infinite planar substrate. The effective surface tension, which is the overall coefficient of the action, does not depend on the latitude angle of the circles.Comment: 6 page

Anomalous Spreading of Power-Law Quantum Wave Packets

We introduce power-law tail quantum wave packets. We show that they can be seen as eigenfunctions of a Hamiltonian with a physical potential. We prove that the free evolution of these packets presents an asymptotic decay of the maximum of the wave packets which is anomalous for an interval of the characterizing power-law exponent. We also prove that the number of finite moments of the wave packets is a conserved quantity during the evolution of the wave packet in the free space.Comment: 5 pages, 3 figures, to appear in Phys. Rev. Let

Hierarchically nested factor model from multivariate data

We show how to achieve a statistical description of the hierarchical structure of a multivariate data set. Specifically we show that the similarity matrix resulting from a hierarchical clustering procedure is the correlation matrix of a factor model, the hierarchically nested factor model. In this model, factors are mutually independent and hierarchically organized. Finally, we use a bootstrap based procedure to reduce the number of factors in the model with the aim of retaining only those factors significantly robust with respect to the statistical uncertainty due to the finite length of data records.Comment: 7 pages, 5 figures; accepted for publication in Europhys. Lett. ; the Appendix corresponds to the additional material of the accepted letter

Alignment of Nonspherical Active Particles in Chaotic Flows

We study the orientation statistics of spheroidal, axisymmetric microswimmers, with shapes ranging from disks to rods, swimming in chaotic, moderately turbulent flows. Numerical simulations show that rod-like active particles preferentially align with the flow velocity. To explain the underlying mechanism we solve a statistical model via perturbation theory. We show that such alignment is caused by correlations of fluid velocity and its gradients along particle paths combined with fore-aft symmetry breaking due to both swimming and particle nonsphericity. Remarkably, the discovered alignment is found to be a robust kinematical effect, independent of the underlying flow evolution. We discuss its possible relevance for aquatic ecology.Comment: 5 pages, 3 figures, Supplements in Ancillary directory, accepted in Physical Review Letter

Calibration of optimal execution of financial transactions in the presence of transient market impact

Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the price reacts to trades. In this paper we consider a recently introduced market impact model (Bouchaud et al., 2004), which has the property of describing both the volume and the temporal dependence of price change due to trading. We show how this model can be used to describe price impact also in aggregated trade time or in real time. We then solve analytically and calibrate with real data the optimal execution problem both for risk neutral and for risk averse investors and we derive an efficient frontier of optimal execution. When we include spread costs the problem must be solved numerically and we show that the introduction of such costs regularizes the solution.Comment: 31 pages, 8 figure