Interplay between endogenous and exogenous fluctuations in financial markets

Abstract

We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary mechanism responsible for the observed long-range dependence and statistical properties of high volatility return intervals. By exogenous noise we mean information flow or/and order flow fluctuations. Numerical results based on the proposed model reveal that the exogenous fluctuations have to be considered as indispensable part of comprehensive modeling of the financial markets.

arXiv comment20 pages, 8 figures

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Cited by in corpus (4)

• Universality of market superstatistics
• Burst and inter-burst duration statistics as empirical test of long-range memory in the financial markets
• The consentaneous model of the financial markets exhibiting spurious nature of long-range memory
• Understanding the nature of the long-range memory phenomenon in socioeconomic systems