title: Financial symmetry and moods in the market.
abstract: This paper studies how certain speculative transitions in financial markets can be ascribed to a symmetry break that happens in the collective decision making. Investors are assumed to be bounded rational, using a limited set of information including past price history and expectation on future dividends. Investment strategies are dynamically changed based on realized returns within a game theoretical scheme with Nash equilibria. In such a setting, markets behave as complex systems whose payoff reflect an intrinsic financial symmetry that guarantees equilibrium in price dynamics (fundamentalist state) until the symmetry is broken leading to bubble or anti-bubble scenarios (speculative state). We model such two-phase transition in a micro-to-macro scheme through a Ginzburg-Landau-based power expansion leading to a market temperature parameter which modulates the state transitions in the market. Via simulations we prove that transitions in the market price dynamics can be phenomenologically explained by the number of traders, the number of strategies and amount of information used by agents, all included in our market temperature parameter.
authors: Department of Economics and Management, University of Brescia, Brescia, Italy.
authors: Roberto
authors: R
authors: Savona
authors: Laboratoire J.-A. Dieudonné, Université de Nice-Sophia Antipolis, Nice, France.
authors: Maxence
authors: M
authors: Soumare
authors: CNRS, Centre d'Economie de la Sorbonne, Université Paris 1 Pantheon-Sorbonne, Paris, France.
authors: Jørgen Vitting
authors: JV
authors: Andersen
mesh_terms: D003657:Decision Making; D005544:Forecasting; D007449:Investments / Q000706:statistics & numerical data; D008962:Models, Theoretical; D013269:Stochastic Processes