An explanation for the universal 3.5 power-law observed in currency markets

Nicholas A. Johnson, Neil F Johnson

Research output: Contribution to journalArticle

Abstract

We present a mathematical theory to explain a recent empirical finding in the Physics literature (Zhao et al., 2013) in which the distributions of waiting-times between discrete events were found to exhibit power-law tails with an apparent universal exponent: α ~ 3.5. This new theory provides the first ever qualitative and quantitative explanation of Zhao et al.'s surprising finding. It also provides a mechanistic description of the origin of the observed universality, assigning its cause to the emergence of dynamical feedback processes between evolving clusters of like-minded agents.

Original languageEnglish (US)
Pages (from-to)48-49
Number of pages2
JournalResults in Physics
Volume6
DOIs
StatePublished - 2016

Keywords

  • Collective
  • Complex systems
  • Econophysics
  • Power law

ASJC Scopus subject areas

  • Physics and Astronomy(all)

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