Estimating Phenomenological Parameters in Multi-Assets Markets

  • Giacomo Raffaelli
  • Matteo Marsili
Part of the New Economic Windows book series (NEW)


Financial correlations exhibit a non-trivial dynamic behavior. This is reproduced by a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This captures the fact that correlations determine the optimal portfolio but are affected by investment based on it. Such a feedback on correlations gives rise to an instability when the volume of investment exceeds a critical value. Close to the critical point the model exhibits dynamical correlations very similar to those observed in real markets. We discuss how the model’s parameter can be estimated in real market data with a maximum likelihood principle. This confirms the main conclusion that real markets operate close to a dynamically unstable point.


Optimal Portfolio Price Dynamic Portfolio Investment Real Market Phenomenological Parameter 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag Italia 2006

Authors and Affiliations

  • Giacomo Raffaelli
    • 1
  • Matteo Marsili
    • 2
  1. 1.Dipartimento di Fisica, CNR-ISC and INFM-SMCUniversitá di Roma “La Sapienza”RomaItaly
  2. 2.The Abdus Salam International Centre for Theoretical PhysicsTriesteItaly

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