Critical Ising Model and Financial Market

TL;DR

This paper models stock market dynamics using a near-2D Ising model, revealing critical phenomena like long-range correlations and power-law distributions at critical temperature, linking physics and financial market behavior.

Contribution

It introduces a novel Ising model framework for financial markets, capturing critical phenomena and correlations in stock price dynamics.

Findings

Long-range correlations emerge at critical temperature.

Power-law tails appear in price fluctuation distributions.

Investor response strength relates to inverse temperature.

Abstract

We investigate Ising model description of dynamics of stock price. The model is defined in near 2 dimensions, one dimension is time and another represents ensemble of stocks, and strength of response of investors to price change corresponds to inverse temperature of the system. At critical temperature, infinitely long correlation among number of trades along time is observed and power-law tail in distribution of price fluctuation appears.