Corpus ID: 235765578

Financial Markets and the Phase Transition between Water and Steam

  title={Financial Markets and the Phase Transition between Water and Steam},
  author={C. Schmidhuber},
A lattice gas model of financial markets is presented that has the potential to explain previous empirical observations of the interplay of trends and reversion in the markets, including a Langevin equation for the time evolution of trends. In this model, the shares of an asset correspond to gas molecules that are distributed across a hidden social network of investors. Neighbors in the network tend to align their positions due to herding behavior, corresponding to an attractive force of the… Expand

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