Spin-glass like network model for stock market

Abstract

A statistical physics model for the collective price changes of stock portfolios is proposed. That is an analogue to spin glass model (Mezard et al. 1987) for disordered magnetic system. In this model the time series of price changes are coded into the sequences of up and down spins. The Hamiltonian of the system is expressed by long-range spin-spin interactions as in SherringtonKirtpatrick (S-K) model (Sherrington et al. 1975) of spin glass. The interaction coefficients between two stocks are determined by empirical using fluctuationresponse theorem.