198 research outputs found
Minimal Model of Stochastic Athermal Systems: Origin of Non-Gaussian Noise
For a wide class of stochastic athermal systems, we derive Langevin-like
equations driven by non-Gaussian noise, starting from master equations and
developing a new asymptotic expansion. We found an explicit condition whereby
the non-Gaussian properties of the athermal noise become dominant for tracer
particles associated with both thermal and athermal environments. Furthermore,
we derive an inverse formula to infer microscopic properties of the athermal
bath from the statistics of the tracer particle. We apply our formulation to a
granular motor under viscous friction, and analytically obtain the angular
velocity distribution function. Our theory demonstrates that the non-Gaussian
Langevin equation is the minimal model of athermal systems.Comment: 10 pages, 5 figure
Inferring microscopic financial information from the long memory in market-order flow: A quantitative test of the Lillo-Mike-Farmer model
株式市場での注文流の長期記憶性の起源解明 --18年来の理論的予言をデータ解析で実証--. 京都大学プレスリリース. 2023-11-09.In financial markets, the market-order sign exhibits strong persistence, widely known as the long-range correlation (LRC) of order flow; specifically, the sign autocorrelation function (ACF) displays long memory with power-law exponent γ, such that C(τ)∝τ^−γ for large time-lag τ. One of the most promising microscopic hypotheses is the order-splitting behavior at the level of individual traders. Indeed, Lillo, Mike, and Farmer (LMF) introduced in 2005 a simple microscopic model of order-splitting behavior, which predicts that the macroscopic sign correlation is quantitatively associated with the microscopic distribution of metaorders. While this hypothesis has been a central issue of debate in econophysics, its direct quantitative validation has been missing because it requires large microscopic datasets with high resolution to observe the order-splitting behavior of all individual traders. Here we present the first quantitative validation of this LMF prediction by analyzing a large microscopic dataset in the Tokyo Stock Exchange market for more than nine years. On classifying all traders as either order-splitting traders or random traders as a statistical clustering, we directly measured the metaorder-length distributions P(L)∝L^−α−1 as the microscopic parameter of the LMF model and examined the theoretical prediction on the macroscopic order correlation γ≈α−1. We discover that the LMF prediction agrees with the actual data even at the quantitative level. We also discuss the estimation of the total number of the order-splitting traders from the ACF prefactor, showing that microscopic financial information can be inferred from the LRC in the ACF. Our Letter provides the first solid support of the microscopic model and solves directly a long-standing problem in the field of econophysics and market microstructure
Can we infer microscopic financial information from the long memory in market-order flow?: a quantitative test of the Lillo-Mike-Farmer model
In financial markets, the market order sign exhibits strong persistence,
widely known as the long-range correlation (LRC) of order flow; specifically,
the sign correlation function displays long memory with power-law exponent
, such that for large time-lag .
One of the most promising microscopic hypotheses is the order-splitting
behaviour at the level of individual traders. Indeed, Lillo, Mike, and Farmer
(LMF) introduced in 2005 a simple microscopic model of order-splitting
behaviour, which predicts that the macroscopic sign correlation is
quantitatively associated with the microscopic distribution of metaorders.
While this hypothesis has been a central issue of debate in econophysics, its
direct quantitative validation has been missing because it requires large
microscopic datasets with high resolution to observe the order-splitting
behaviour of all individual traders. Here we present the first quantitative
validation of this LFM prediction by analysing a large microscopic dataset in
the Tokyo Stock Exchange market for more than nine years. On classifying all
traders as either order-splitting traders or random traders as a statistical
clustering, we directly measured the metaorder-length distributions
as the microscopic parameter of the LMF model and
examined the theoretical prediction on the macroscopic order correlation:
. We discover that the LMF prediction agrees with
the actual data even at the quantitative level. Our work provides the first
solid support of the microscopic model and solves directly a long-standing
problem in the field of econophysics and market microstructure.Comment: 4 pages, 4 figure
Exact solution to a generalised Lillo-Mike-Farmer model with heterogeneous order-splitting strategies
The Lillo-Mike-Farmer (LMF) model is an established econophysics model
describing the order-splitting behaviour of institutional investors in
financial markets. In the original article (LMF, Physical Review E 71, 066122
(2005)), LMF assumed the homogeneity of the traders' order-splitting strategy
and derived a power-law asymptotic solution to the order-sign autocorrelation
function (ACF) based on several heuristic reasonings. This report proposes a
generalised LMF model by incorporating the heterogeneity of traders'
order-splitting behaviour that is exactly solved without heuristics. We find
that the power-law exponent in the order-sign ACF is robust for arbitrary
heterogeneous intensity distributions. On the other hand, the prefactor in the
ACF is very sensitive to heterogeneity in trading strategies and is shown to be
systematically underestimated in the original homogeneous LMF model. Our work
highlights that the ACF prefactor should be more carefully interpreted than the
ACF power-law exponent in data analyses.Comment: 16 pages,4 figure
Field master equation theory of the self-excited Hawkes process
A field theoretical framework is developed for the Hawkes self-excited point
process with arbitrary memory kernels by embedding the original non-Markovian
one-dimensional dynamics onto a Markovian infinite-dimensional one. The
corresponding Langevin dynamics of the field variables is given by stochastic
partial differential equations that are Markovian. This is in contrast to the
Hawkes process, which is non-Markovian (in general) by construction as a result
of its (long) memory kernel. We derive the exact solutions of the
Lagrange-Charpit equations for the hyperbolic master equations in the Laplace
representation in the steady state, close to the critical point of the Hawkes
process. The critical condition of the original Hawkes process is found to
correspond to a transcritical bifurcation in the Lagrange-Charpit equations. We
predict a power law scaling of the PDF of the intensities in an intermediate
asymptotics regime, which crosses over to an asymptotic exponential function
beyond a characteristic intensity that diverges as the critical condition is
approached. We also discuss the formal relationship between quantum field
theories and our formulation. Our field theoretical framework provides a way to
tackle complex generalisation of the Hawkes process, such as nonlinear Hawkes
processes previously proposed to describe the multifractal properties of
earthquake seismicity and of financial volatility.Comment: 39 pages, 7 figure
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