Superstatistics in Econophysics

TL;DR

This paper models an idealized stock market to explore how trader diversity leads to power law asset distributions, using superstatistics to explain the emergence of Pareto-like scaling.

Contribution

It introduces a superstatistics framework to explain power law asset distributions in a simulated stock market with trader heterogeneity.

Findings

Trader diversity results in Pareto-like asset distributions.

Superstatistics effectively models the hierarchical structure of trader growth rates.

Asset distribution transitions from Gaussian to power law with increased heterogeneity.

Abstract

We consider an ideal closed stock market, in which 100 traders have economic activities. The assets of the traders change through buying and selling stocks. We simulate the assets under conservation of both total currency and total number of stocks. If the traders are identical, then the assets are distributed as a stationary Gaussian. When variety among the traders makes winners and losers, the asset distribution displays power law scaling such as the Pareto law. We discuss this power law scaling from the point of view of superstatistics. It is given as a superposition of scaled distributions for each hierarchical level. The various traders have the same growth rate distribution to keep the scaling.