Econophysics review: I. Empirical facts

Quantitative Finance

Volumn 11, Issue 7, 2011, Pages 991-1012

  Chakraborti, Anirban ^a   Toke, Ioane Muni ^a   Patriarca, Marco ^b,c   Abergel, Frédéric ^a  

^a ECOLE CENTRALE PARIS   (France)

^b NATIONAL INSTITUTE OF CHEMICAL PHYSICS AND BIOPHYSICS   (Estonia)

^c CSIC   (Spain)

Author keywords

Computational finance; Correlation; Econophysics; Empirical finance

Indexed keywords

EID: 79960682155     PISSN: 14697688     EISSN: 14697696     Source Type: Journal    
DOI: 10.1080/14697688.2010.539248     Document Type: Review

References (122)

1. Arthur, W., Complexity and the economy. Science, 1999, 284, 107-109.
2. Bachelier, L., Theorie de la speculation. Annales Scientifiques de l'Ecole Normale Superieure, 1900, III-17, 21-86.
3. Barndorff-Nielsen, O.E. and Shephard, N., Variation, jumps and high frequency data in financial econometrics. In Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress, Econometric Society Monographs, edited by R. Blundell, T. Persson and W.K. Newey, pp. 328-372, 2007 (Cambridge University Press: Cambridge).
4. Biais, B., Foucault, T. and Hillion, P., Microstructure des Marches Financiers: Institutions, Modeles et Tests Empiriques, 1997 (Presses Universitaires de France: Paris).
5. Biais, B., Hillion, P. and Spatt, C., An empirical analysis of the limit order book and the order flow in the Paris Bourse. J. Finance, 1995, 1655-1689.
6. Black, F. and Scholes, M., The pricing of options and corporate liabilities. J. Polit. Econ., 1973, 81, 637-654.
7. Blatt, M., Wiseman, S. and Domany, E., Superparamagnetic clustering of data. Phys. Rev. Lett., 1996, 76, 3251-3254.
8. Bollerslev, T., Engle, R.F. and Nelson, D.B., Arch models. In Handbook of Econometrics 4, edited by R.F. Engle and D.L. McFadden, pp. 2959-3038, 1994 (Elsevier: Amsterdam).
9. Bonanno, G., Lillo, F. and Mantegna, R.N., Highfrequency cross-correlation in a set of stocks. Quant. Finance, 2001, 1, 96-104.
10. Boness, A.J., English translation of Théorie de la spéculation. In The Random Character of Stock Market Prices, edited by P.H. Cootner, pp. 17-75, 1964 (MIT Press: Cambridge, MA).
11. Bouchaud, J.-P., Economics needs a scientific revolution. Nature, 2008, 455, 1181.
12. Bouchaud, J.-P., Farmer, J.D. and Lillo, F., How markets slowly digest changes in supply and demand. In Handbook of Financial Markets: Dynamics and Evolution, edited by T. Hens and K.R. Schenk-Hopp, pp. 57-160, 2009 (North-Holland: San Diego).
13. Bouchaud, J.-P. and Potters, M., Theory of Financial Risks: From Statistical Physics to Risk Management, 2000 (Cambridge University Press: Cambridge).
14. Bouchaud, J.-P., Mézard, M. and Potters, M., Statistical properties of stock order books: Empirical results and models. Quant. Finance, 2002, 2, 251-256.
15. Brock, W.A. and Hommes, C.H., Heterogeneous beliefs and routes to chaos in a simple asset pricing model. J. Econ. Dynam. Control, 1998, 22, 1235-1274.
16. Burda, Z., Jurkiewicz, J., Nowak, M.A., Papp, G. and Zahed, I., Levy matrices and financial covariances. cond-mat/0103108, 2001.
17. Chakrabarti, A.S. and Chakrabarti, B.K., Statistical theories of income and wealth distribution. Economics E-Journal (open access), 2010, 4, 1-32.
18. Chakrabarti, B.K., Chakraborti, A. and Chatterjee, A., eds, Econophysics and Sociophysics: Trends and Perspectives, 1st ed., 2006 (Wiley-VCH: Berlin).
19. Chakraborti, A., Patriarca, M. and Santhanam, M.S., Financial time-series analysis: A brief overview. In Econophysics of Markets and Business Networks, 2007 (Springer: Milan).
20. Challet, D. and Stinchcombe, R., Analyzing and modeling 1{thorn}1d markets. Physica A, 2001, 300, 285-299.
21. Chiarella, C., He, X. and Hommes, C., A dynamic analysis of moving average rules. J. Econ. Dynam. Control, 2006, 30, 1729-1753.
22. Cizeau, P., Liu, Y., Meyer, M., Peng, C.K. and Stanley, H.E., Volatility distribution in the S&P500 stock index. Physica A, 1997, 245, 441-445.
23. Cizeau, P., Potters, M. and Bouchaud, J., Correlation structure of extreme stock returns. Quant. Finance, 2001, 1, 217-222.
24. Clark, P.K., A subordinated stochastic process model with finite variance for speculative prices. Econometrica, 1973, 41, 135-155.
25. Cont, R., Empirical properties of asset returns: Stylized facts and statistical issues. Quant. Finance, 2001, 1, 223-236.
26. Cont, R., Potters, M. and Bouchaud, J.-P., Scale invariance and beyond. In Proceedings of the CNRS Workshop on Scale Invariance, edited by F.G.B. Dubrulle and D. Sornette, 1997 (Springer: Berlin). Available online at: http://ssrn.com/ abstract=39420 or doi:10.2139/ssrn.39420.
27. Cont, R. and Tankov, P., Financial Modelling with Jump Processes, 2004 (Chapman & Hall/CRC: London).
28. Courtault, J., Kabanov, Y., Bru, B., Crepel, P., Lebon, I. and Le Marchand, A., Louis Bachelier on the centenary of Theorie de la Speculation. Math. Finance, 2000, 10, 339-353.
29. de Haan, L., Resnick, S. and Drees, H., How to make a Hill plot. Ann. Statist., 2000, 28, 254-274.
30. de Oliveira, S.M., de Oliveira, P.M.C. and Stauffer, D., Evolution, Money, War and Computers, 1999 (B. G. Teubner: Stuttgart).
31. di Ettore Majorana, N., Il valore delle leggi statistiche nella fisica e nelle scienze sociali. Scientia, 1942, 36, 58-66.
32. Dremin, I. and Leonidov, A., On distribution of number of trades in different time windows in the stock market. Physica A, 2005, 353, 388-402.
33. Duffie, D., Dynamic Asset Pricing Theory, 1996 (Princeton University Press: Princeton, NJ).
34. Engle, R.F., The econometrics of ultra-high-frequency data. Econometrica, 2000, 68, 1-22.
35. Engle, R.F. and Russell, J.R., Forecasting the frequency of changes in quoted foreign exchange prices with the autoregressive conditional duration model. J. Empir. Finance, 1997, 4, 187-212.
36. Epps, T.W., Comovements in stock prices in the very short run. J. Am. Statist. Assoc., 1979, 74, 291-298.
37. Farmer, J.D. and Foley, D., The economy needs agent-based modelling. Nature, 2009, 460, 685-686.
38. Feller, W., Introduction to the Theory of Probability and its Applications, Vol. 2, 1968 (Wiley: New York).
39. Follmer, H. and Schied, A., Stochastic Finance: An Introduction In Discrete Time 2, 2nd revised ed., 2004 (Walter de Gruyter).
40. Forfar, D., Louis Bachelier. In Louis Bachelier The MacTutor History of Mathematics Archive (published online), edited by J. O'Connor and E.F. Robertson, 2002.
41. Gabaix, X., Power laws in economics and finance. A. Rev. Econ., 2009, 1, 255-294.
42. Gabaix, X., Gopikrishnan, P., Plerou, V. and Stanley, H.E., Institutional investors and stock market volatility. Q. J. Econ., 2006, 121, 461-504.
43. Gallegati, M. and Kirman, A.P., editors, Beyond the Representative Agent, 1st ed., 1999 (Edward Elgar Publishing: Cheltenham).
44. Garman, M.B., Market microstructure. J. Financial Econ., 1976, 3, 257-275.
45. Gatheral, J., The Volatility Surface: A Practitioner's Guide, 2006 (Wiley: New York).
46. Glosten, L.R., Is the electronic open limit order book inevitable? J. Finance, 1994, 49, 1127-1161.
47. Gopikrishnan, P., Meyer, M., Amaral, L.A. and Stanley, H.E., Inverse cubic law for the probability distribution of stock price variations. Eur. Phys. J. B, 1998, 3, 139-140.
48. Gopikrishnan, P., Plerou, V., Amaral, L.A., Meyer, M. and Stanley, H.E., Scaling of the distribution of fluctuations of financial market indices. Phys. Rev. E, 1999, 60, 5305-5316.
49. Gopikrishnan, P., Plerou, V., Gabaix, X. and Stanley, H.E., Statistical properties of share volume traded in financial markets. Phys. Rev. E, 2000a, 62, 4493-4496.
50. Gopikrishnan, P., Plerou, V., Gabaix, X. and Stanley, H.E., Statistical properties of share volume traded in financial markets. Phys. Rev. E, 2000b, 62, R4493-R4496.
51. Gopikrishnan, P., Rosenow, B., Plerou, V. and Stanley, H.E., Quantifying and interpreting collective behavior in financial markets. Phys. Rev. E, 2001, 64, 035106-1-035106-4.
52. Griffin, J.E. and Oomen, R.C.A., Sampling returns for realized variance calculations: Tick time or transaction time? Econometr. Rev., 2008, 27, 230-253.
53. Guillaume, D., Dacorogna, M., Davé, R., Müller, U., Olsen, R. and Pictet, O., From the bird's eye to the microscope: A survey of new stylized facts of the intra-daily foreign exchange markets. Finance Stochast., 1997, 1, 95-129.
54. Haberman, S. and Sibbett, T.A., editors, English translation of: Louis bachelier, Théorie de la spéculation, Annales scientifiques de l'Ecole Normale Superieure. In History of Actuarial Science 7, 1995 (Pickering and Chatto: London).
55. Hasbrouck, J., Empirical Market Microstructure: The Institutions, Economics, and Econometrics of Securities Trading, 2007 (Oxford University Press: New York).
56. Hautsch, N., Modelling Irregularly Spaced Financial Data, 2004 (Springer: Berlin).
57. Hayashi, T. and Yoshida, N., On covariance estimation of non-synchronously observed diffusion processes. Bernoulli, 2005, 11, 359-379.
58. Heston, S., A closed-form solution for options with stochastic volatility with applications to bond and currency options. Rev. Financial Stud., 1993, 6, 327-343.
59. Hill, B.M., A simple general approach to inference about the tail of a distribution. Ann. Statist., 1975, 3, 1163-1174.
60. Huth, N. and Abergel, F., The times change: Multivariate subordination, empirical facts. SSR NeLibrary, 2009.
61. Iori, G. and Precup, O.V., Weighted network analysis of high-frequency cross-correlation measures. Phys. Rev. E, 2007, 75, 036110-7.
62. Itō, K. and McKean, H., Diffusion Processes and Their Sample Paths, 1996 (Springer: Berlin).
63. Ivanov, P.C., Yuen, A., Podobnik, B. and Lee, Y., Common scaling patterns in intertrade times of U. S. stocks. Phys. Rev. E, 2004, 69, 056107-1-056107-7.
64. Kadanoff, L., From simulation model to public policy: An examination of Forrester's 'Urban Dynamics'. Simulation, 1971, 16, 261-268.
65. Kaldor, N., Capital accumulation and economic growth. In The Theory of Capital, edited by F.A. Lutz and D.C. Hague, pp. 177-222, 1961 (Macmillan: London).
66. Keynes, J.M., The General Theory of Employment, Interest and Money, 1973 (The Royal Economic Society, Macmillan Press: London).
67. Kindleberger, C.P. and Aliber, R.Z., Manias, Panics, and Crashes: A History of Financial Crises, 5th ed., 2005 (Wiley: New York).
68. Kirman, A., Whom or what does the representative individual represent? J. Econ. Perspect., 1992, 117-136.
69. Kullmann, L., Kertesz, J. and Mantegna, R.N., Identification of clusters of companies in stock indices via Potts super-paramagnetic transitions. Physica A, 2000, 287, 412-419.
70. Kullmann, L., Toyli, J., Kertesz, J., Kanto, A. and Kaski, K., Characteristic times in stock market indices. Physica A, 1999, 269, 98-110.
71. Kyle, A.S., Continuous auctions and insider trading. Econometrica, 1985, 53, 1315-1335.
72. Laloux, L., Cizeau, P., Bouchaud, J. and Potters, M., Noise dressing of financial correlation matrices. Phys. Rev. Lett., 1999, 83, 1467-1470.
73. Landau, L.D., Statistical Physics, vol. 5 of Theoretical Physics, 1965 (Pergamon Press: Oxford).
74. Lillo, F. and Farmer, J.D., The long memory of the efficient market. Stud. Nonlinear Dynam. Econometr., 2004, 8, 1-33.
75. Lillo, F., Farmer, D. and Mantegna, R., Econophysics: Master curve for price-impact function. Nature, 2003, 421, 129-130.
76. Liu, Y., Cizeau, P., Meyer, M., Peng, C.K. and Stanley, H.E., Correlations in economic time series. Physica A, 1997, 245, 437-440.
77. Lux, T. and Sornette, D., On rational bubbles and fat tails. J. Money, Credit, Bank., 2002, 34, 589-610.
78. Lux, T. and Westerhoff, F., Economics crisis. Nature Phys., 2009, 5, 2-3.
79. Malliavin, P. and Mancino, M.E., Fourier series method for measurement of multivariate volatilities. Finance Stochast., 2002, 6, 49-61.
80. Mandelbrot, B., The Pareto-Levy law and the distribution of income. Int. Econ. Rev., 1960, 79-106.
81. Mandelbrot, B., The variation of certain speculative prices. J. Business, 1963, 36, 394-419.
82. Mantegna, R., Levy walks and enhanced diffusion in Milan stock exchange. Physica A, 1991, 179, 232-242.
83. Mantegna, R., Hierarchical structure in financial markets. Eur. Phys. J. B, 1999, 11, 193-197.
84. Mantegna, R., Presentation of the English translation of Ettore Majorana's paper: The value of statistical laws in physics and social sciences. Quant. Finance, 2005, 5, 133-140.
85. Mantegna, R., The tenth article of Ettore Majorana. Europhys. News, 2006, 37, 15-17.
86. Mantegna, R. and Stanley, H.E., Introduction to Econophysics: Correlations and Complexity in Finance, 2007 (Cambridge University Press: Cambridge).
87. Maslov, S. and Mills, M., Price fluctuations from the order book perspective-Empirical facts and a simple model. Physica A, 2001, 299, 234-246.
88. McAleer, M. and Medeiros, M.C., Realized volatility: A review. Econometr. Rev., 2008, 27, 10-45.
89. Merton, R., Theory of rational option pricing. Bell J. Econ. Mgmt Sci., 1973, 141-183.
90. Mike, S. and Farmer, J.D., An empirical behavioral model of liquidity and volatility. J. Econ. Dynam. Control, 2008, 32, 200-234.
91. Montroll, E. and Badger, W., Introduction to Quantitative Aspects of Social Phenomena, 1974 (Gordon and Breach: New York).
92. Muni Toke, I., 'Market making' in an order book model and its impact on the bid-ask spread. In Econophysics of Order-Driven Markets, 2010 (Springer: Milan).
93. Noh, J.D., Model for correlations in stock markets. Phys. Rev. E, 2000, 61, 5981-5982.
94. O'Hara, M., Market Microstructure Theory, 2nd ed., 1997 (Blackwell: Oxford).
95. Onnela, J.-P., Taxonomy of financial assets. Master's thesis, Helsinki University of Technology, 2000.
96. Onnela, J.-P., Chakraborti, A., Kaski, K. and Kertesz, J., Dynamic asset trees and portfolio analysis. Eur. Phys. J. B, 2002, 30, 285-288.
97. Onnela, J.-P., Chakraborti, A., Kaski, K. and Kertesz, J., Dynamic asset trees and Black Monday. Physica A, 2003a, 324, 247-252.
98. Onnela, J.-P., Chakraborti, A., Kaski, K., Kertesz, J. and Kanto, A., Dynamics of market correlations: Taxonomy and portfolio analysis. Phys. Rev. E, 2003b, 68, 056110-1-056110-12.
99. Onnela, J.-P., Chakraborti, A., Kaski, K., Kertez, J. and Kanto, A., Asset trees and asset graphs in financial markets. Phys. Scripta, 2003c, T106, 48-54.
100. Osborne, M.F.M., Brownian motion in the stock market. Oper. Res., 1959, 7, 145-173.
101. Pagan, A., The econometrics of financial markets. J. Empir. Finance, 1996, 3, 15-102.
102. Pareto, V., Cours d'Economie Politique, 1897 (Rouge: Lausanne). Reprinted as a volume of Oeuvres Completes, edited by G. Bousquet and G. Busino, 1964 (Droz: Geneve).
103. Parisi, G., Complex systems: A physicist's viewpoint. Physica A, 1999, 263, 557-564.
104. Pathria, R.K., Statistical Mechanics, 2nd ed., 1996 (Butterworth-Heinemann: Oxford).
105. Plerou, V., Gopikrishnan, P., Nunes Amaral, L.A., Gabaix, X. and Eugene Stanley, H., Economic fluctuations and anomalous diffusion. Phys. Rev. E, 2000, 62, R3023-R3026.
106. Plerou, V., Gopikrishnan, P., Rosenow, B., Amaral, L.A.N., Guhr, T. and Stanley, H.E., Random matrix approach to cross correlations in financial data. Phys. Rev. E, 2002, 65, 066126-1-066126-18.
107. Plerou, V., Gopikrishnan, P., Rosenow, B., Amaral, L.A.N. and Stanley, H.E., Universal and nonuniversal properties of cross correlations in financial time series. Phys. Rev. Lett., 1999, 83, 1471-1474.
108. Podobnik, B., Ivanov, P.C., Lee, Y., Chessa, A. and Stanley, H.E., Systems with correlations in the variance: Generating power law tails in probability distributions. Europhys. Lett., 2000, 50, 711-717.
109. Politi, M. and Scalas, E., Fitting the empirical distribution of intertrade durations. Physica A, 2008, 387, 2025-2034.
110. Potters, M. and Bouchaud, J.P., More statistical properties of order books and price impact. Physica A, 2003, 324, 133-140.
111. Reif, F., Fundamentals of Statistical and Thermal Physics, 1985 (McGraw-Hill: Singapore).
112. Reno, R., A closer look at the Epps effect. Int. J. Theor. Appl. Finance, 2003, 6, 87-102.
113. Roehner, B., Patterns of Speculation: A Study in Observational Econophysics, 2002 (Cambridge University Press: Cambridge).
114. Saha, M.N. and Srivastava, B.N., A Treatise on Heat, 3 ed., 1950 (The Indian Press: Allahabad).
115. Samuelson, P., Proof that properly anticipated prices fluctuate randomly. Ind. Mgmt Rev., 1965, 6, 41-49.
116. Samuelson, P., Economics, 1998 (McGraw-Hill: Auckland).
117. Silva, A.C. and Yakovenko, V.M., Stochastic volatility of financial markets as the fluctuating rate of trading: An empirical study. Physica A, 2007, 382, 278-285.
118. Sinha, S., Chatterjee, A., Chakraborti, A. and Chakrabarti, B.K., Econophysics: An Introduction, 2010 (Wiley-VCH: Weinheim).
119. Stauffer, D., de Oliveira, S.M., de Oliveira, P.M.C. and de Sa Martins, J.S., Biology, Sociology, Geology by Computational Physicists, 2006 (Elsevier: Amsterdam).
120. Taqqu, M., Bachelier and his times: A conversation with Bernard Bru. Finance Stochast., 2001, 5, 3-32.
121. Tsay, R., Analysis of Financial Time Series, 2005 (Wiley-Interscience: New York).
122. Wyart, M. and Bouchaud, J.-P., Self-referential behaviour, overreaction and conventions in financial markets. J. Econ. Behav. Organiz., 2007, 63, 1-24.