Long-Time Fluctuations in a Dynamical Model of Stock Market Indices

Financial time series typically exhibit strong fluctuations that cannot be described by a Gaussian distribution. In recent empirical studies of stock market indices it was examined whether the distribution P(r) of returns r(tau) after some time tau can be described by a (truncated) Levy-stable distribution L_{alpha}(r) with some index 0 < alpha <= 2. While the Levy distribution cannot be expressed in a closed form, one can identify its parameters by testing the dependence of the central peak height on tau as well as the power-law decay of the tails. In an earlier study [Mantegna and Stanley, Nature 376, 46 (1995)] it was found that the behavior of the central peak of P(r) for the Standard & Poor 500 index is consistent with the Levy distribution with alpha=1.4. In a more recent study [Gopikrishnan et al., Phys. Rev. E 60, 5305 (1999)] it was found that the tails of P(r) exhibit a power-law decay with an exponent alpha ~= 3, thus deviating from the Levy distribution. In this paper we study the distribution of returns in a generic model that describes the dynamics of stock market indices. For the distributions P(r) generated by this model, we observe that the scaling of the central peak is consistent with a Levy distribution while the tails exhibit a power-law distribution with an exponent alpha > 2, namely beyond the range of Levy-stable distributions. Our results are in agreement with both empirical studies and reconcile the apparent disagreement between their results

Mesoscopic modelling of financial markets

We derive a mesoscopic description of the behavior of a simple financial market where the agents can create their own portfolio between two investment alternatives: a stock and a bond. The model is derived starting from the Levy-Levy-Solomon microscopic model (Econ. Lett., 45, (1994), 103--111) using the methods of kinetic theory and consists of a linear Boltzmann equation for the wealth distribution of the agents coupled with an equation for the price of the stock. From this model, under a suitable scaling, we derive a Fokker-Planck equation and show that the equation admits a self-similar lognormal behavior. Several numerical examples are also reported to validate our analysis

Power-law distributions and Levy-stable intermittent fluctuations in stochastic systems of many autocatalytic elements

A generic model of stochastic autocatalytic dynamics with many degrees of freedom $w_i$ $i=1,...,N$ is studied using computer simulations. The time evolution of the $w_i$'s combines a random multiplicative dynamics $w_i(t+1) = \lambda w_i(t)$ at the individual level with a global coupling through a constraint which does not allow the $w_i$'s to fall below a lower cutoff given by $c \cdot \bar w$, where $\bar w$ is their momentary average and $0<c<1$ is a constant. The dynamic variables $w_i$ are found to exhibit a power-law distribution of the form $p(w) \sim w^{-1-\alpha}$. The exponent $\alpha (c,N)$ is quite insensitive to the distribution $\Pi(\lambda)$ of the random factor $\lambda$, but it is non-universal, and increases monotonically as a function of $c$. The "thermodynamic" limit, N goes to infty and the limit of decoupled free multiplicative random walks c goes to 0, do not commute: $\alpha(0,N) = 0$ for any finite $N$ while $\alpha(c,\infty) \ge 1$ (which is the common range in empirical systems) for any positive $c$. The time evolution of ${\bar w (t)}$ exhibits intermittent fluctuations parametrized by a (truncated) L\'evy-stable distribution $L_{\alpha}(r)$ with the same index $\alpha$. This non-trivial relation between the distribution of the $w_i$'s at a given time and the temporal fluctuations of their average is examined and its relevance to empirical systems is discussed.Comment: 7 pages, 4 figure

Cutting the same fraction of several measures

We study some measure partition problems: Cut the same positive fraction of $d+1$ measures in $\mathbb R^d$ with a hyperplane or find a convex subset of $\mathbb R^d$ on which $d+1$ given measures have the same prescribed value. For both problems positive answers are given under some additional assumptions.Comment: 7 pages 2 figure

The Magnetic Field of the Solar Corona from Pulsar Observations

We present a novel experiment with the capacity to independently measure both the electron density and the magnetic field of the solar corona. We achieve this through measurement of the excess Faraday rotation due to propagation of the polarised emission from a number of pulsars through the magnetic field of the solar corona. This method yields independent measures of the integrated electron density, via dispersion of the pulsed signal and the magnetic field, via the amount of Faraday rotation. In principle this allows the determination of the integrated magnetic field through the solar corona along many lines of sight without any assumptions regarding the electron density distribution. We present a detection of an increase in the rotation measure of the pulsar J1801$-$2304 of approximately 160 \rad at an elongation of 0.95$^\circ$ from the centre of the solar disk. This corresponds to a lower limit of the magnetic field strength along this line of sight of $> 393\mu\mathrm{G}$. The lack of precision in the integrated electron density measurement restricts this result to a limit, but application of coronal plasma models can further constrain this to approximately 20mG, along a path passing 2.5 solar radii from the solar limb. Which is consistent with predictions obtained using extensions to the Source Surface models published by Wilcox Solar ObservatoryComment: 16 pages, 4 figures (1 colour): Submitted to Solar Physic

One- and many-body effects on mirages in quantum corrals

Recent interesting experiments used scanning tunneling microscopy to study systems involving Kondo impurities in quantum corrals assembled on Cu or noble metal surfaces. The solution of the two-dimensional one-particle Schrodinger equation in a hard wall corral without impurity is useful to predict the conditions under which the Kondo effect can be projected to a remote location (the quantum mirage). To model a soft circular corral, we solve this equation under the potential W*delta(r-r0), where r is the distance to the center of the corral and r0 its radius. We expand the Green's function of electron surface states Gs0 for r<r0 as a discrete sum of contributions from single poles at energies epsilon_i-I*delta_i. The imaginary part delta_i is the half-width of the resonance produced by the soft confining potential, and turns out to be a simple increasing function of epsilon_i. In presence of an impurity, we solve the Anderson model at arbitrary temperatures using the resulting expression for Gs0 and perturbation theory up to second order in the Coulomb repulsion U. We calculate the resulting change in the differential conductance Delta dI/dV as a function of voltage and space, in circular and elliptical corrals, for different conditions, including those corresponding to recent experiments. The main features are reproduced. The role of the direct hybridization between impurity and bulk, the confinement potential, the size of the corral and temperature on the intensity of the mirage are analyzed. We also calculate spin-spin correlation functions.Comment: 13 pages, 12 figures, accepted for publication in Phys. Rev. B. Calculations of spin correlations within an additional approximation adde

Structural Probe of a Glass Forming Liquid: Generalized Compressibility

We introduce a new quantity to probe the glass transition. This quantity is a linear generalized compressibility which depends solely on the positions of the particles. We have performed a molecular dynamics simulation on a glass forming liquid consisting of a two component mixture of soft spheres in three dimensions. As the temperature is lowered (or as the density is increased), the generalized compressibility drops sharply at the glass transition, with the drop becoming more and more abrupt as the measurement time increases. At our longest measurement times, the drop occurs approximately at the mode coupling temperature $T_C$. The drop in the linear generalized compressibility occurs at the same temperature as the peak in the specific heat. By examining the inherent structure energy as a function of temperature, we find that our results are consistent with the kinetic view of the glass transition in which the system falls out of equilibrium. We find no size dependence and no evidence for a second order phase transition though this does not exclude the possibility of a phase transition below the observed glass transition temperature. We discuss the relation between the linear generalized compressibility and the ordinary isothermal compressibility as well as the static structure factor.Comment: 18 pages, Latex, 26 encapsulated postscript figures, revised paper is shorter, to appear in Phys. Rev.

Basic kinetic wealth-exchange models: common features and open problems

We review the basic kinetic wealth-exchange models of Angle [J. Angle, Social Forces 65 (1986) 293; J. Math. Sociol. 26 (2002) 217], Bennati [E. Bennati, Rivista Internazionale di Scienze Economiche e Commerciali 35 (1988) 735], Chakraborti and Chakrabarti [A. Chakraborti, B. K. Chakrabarti, Eur. Phys. J. B 17 (2000) 167], and of Dragulescu and Yakovenko [A. Dragulescu, V. M. Yakovenko, Eur. Phys. J. B 17 (2000) 723]. Analytical fitting forms for the equilibrium wealth distributions are proposed. The influence of heterogeneity is investigated, the appearance of the fat tail in the wealth distribution and the relaxation to equilibrium are discussed. A unified reformulation of the models considered is suggested.Comment: Updated version; 9 pages, 5 figures, 2 table

Weakly-Bound Three-Body Systems with No Bound Subsystems

We investigate the domain of coupling constants which achieve binding for a 3-body system, while none of the 2-body subsystems is bound. We derive some general properties of the shape of the domain, and rigorous upper bounds on its size, using a Hall--Post decomposition of the Hamiltonian. Numerical illustrations are provided in the case of a Yukawa potential, using a simple variational method.Comment: gzipped ps with 11 figures included. To appear in Phys. Rev.

PT-symmetric Solutions of Schrodinger Equation with position-dependent mass via Point Canonical Transformation

PT-symmetric solutions of Schrodinger equation are obtained for the Scarf and generalized harmonic oscillator potentials with the position-dependent mass. A general point canonical transformation is applied by using a free parameter. Three different forms of mass distributions are used. A set of the energy eigenvalues of the bound states and corresponding wave functions for target potentials are obtained as a function of the free parameter.Comment: 13 page