A q-spin Potts model of markets: Gain-loss asymmetry in stock indices as an emergent phenomenon (2112.06290v1)

Abstract: Spin models of markets inspired by physics models of magnetism, as the Ising model, allow for the study of the collective dynamics of interacting agents in a market. The number of possible states has been mostly limited to two (buy or sell) or three options. However, herding effects of competing stocks and the collective dynamics of a whole market may escape our reach in the simplest models. Here I study a q-spin Potts model version of a simple Ising market model to represent the dynamics of a stock market index in a spin model. As a result, a self-organized gain-loss asymmetry in the time series of an index variable composed of stocks in this market is observed.