2006/05/16 by Ted Theodosopoulos, Theodosopoulos, Ted, Ming Yuen +1
Economics, Econometrics and Finance · Mathematics · Physics and Astronomy · #60K35 #82C22 #91B70 #Complex Systems and Time Series Analysis #FOS: Economics and business #FOS: Mathematics #Opinion Dynamics and Social Influence #Probability (math.PR) #Statistical Finance (q-fin.ST) #Theoretical and Computational Physics #math.PR #msc:60K35 #msc:82C22 #msc:91B70 #q-fin.ST
paper · pdf · doi:10.48550/arxiv.math/0605421
12 pages, 7 figures, to be presented at the WEHIA 2006
arxiv created 2006/05/16 · openalex publication_date 2006/05/16 · arxiv updated 2009/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this paper we extend the series of our studies on the properties of an interacting particle model for market microstructure. In our earlier work we defined a Markov process on the majority opinion of the agents, obtained the transition probabilities and analyzed the martingale properties of the ensuing wealth process. Here we relax the assumption on the choices of individual agents by allowing mixed strategies, offering opportunities for the agents to gain intermediate submartingale exposure for their individual wealth processes. We develop a novel two-dimensional spin system to model the critical regions of the wealth process as a reflection of the agents' behaviors. We exhibit strategic conflicts between individual market participants and the market as a whole, and identify a new source of uncertainty arising from `reinforced expectations'.