Tobias Preis, Sebastian Golke, Wolfgang Paul, and Johannes J. Schneider Europhysics Letters 75, 510-516 (2006) — We introduce a simple model for simulating financial markets, based on an order book, in which several agents trade one asset at a virtual exchange continuously. We show that a market trend, i.e. an asymmetric order flow of any type, leads to a non-trivial Hurst exponent for the price development, but not to "fat-tailed" return distributions. When one additionally couples the order entry depth to the prevailing trend, also the stylized empirical fact of "fat tails" can be reproduced by our Order Book Model.

Selected Publications in Econophysics and Interdisciplinary Physics in 2006

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Patanarapeelert K., Frank T.D., Friedrich R., Beek P.J. & Tang I.M., A data analysis method for identifying deterministic components of stable and unstable time-delayed systems with colored noise, Physics Letters, Section A 360, 190-198 (2006)

Takeda K., Uda S. & Kabashima Y., Analysis of CDMA systems that are characterized by eigenvalue spectrum, Europhysics Letters 76, 1193-1199 (2006)

Apostolov S.S., Mayzelis Z.A., Usatenko O.V. & Yampol'skii V.A., Equivalence of the Markov chains and two-sided symbolic sequences, Europhysics Letters 76, 1015-1021 (2006)

Chatterjee A. & Chakrabarti B.K., Kinetic market models with single commodity having price fluctuations, European Physical Journal B 54, 399-404 (2006)

Kim K., Kim S.Y., Lee M. & Yum M.-K., Hurst exponents in futures exchange markets, International Journal of Modern Physics C 17, 1831-1838 (2006)

Thomas K. & Dia H., Comparative evaluation of freeway incident detection models using field data, IEE Proceedings 153, - (2006)

Challet D., News and price returns from threshold behaviour and vice-versa: Exact solution of an agent-based market model, Journal of Physics A 39, 001 (2006)

Melnyk S.S., Usatenko O.V., Yampol'skii V.A., Apostolov S.S. & Maiselis Z.A., Memory functions and correlations in additive binary Markov chains, Journal of Physics A 39, 004 (2006)

Sousa T. & Domingos T., Equilibrium econophysics: A unified formalism for neoclassical economics and equilibrium thermodynamics, Physica A 371, 492-512 (2006)

Aiba Y. & Hatano N., A microscopic model of triangular arbitrage, Physica A 371, 572-584 (2006)

Villarroel J., Valuation of stochastic interest rate securities with time-dependent variance, Physica A 371, 513-524 (2006)

Ishikawa A., Annual change of Pareto index dynamically deduced from the law of detailed quasi-balance, Physica A 371, 525-535 (2006)

Ren F., Zheng B., Qiu T. & Trimper S., Score-dependent payoffs and Minority Games, Physica A 371, 649-657 (2006)

Muniandy S.V. & Uning R., Characterization of exchange rate regimes based on scaling and correlation properties of volatility for ASEAN-5 countries, Physica A 371, 585-598 (2006)

Burda Z., Gorlich A.T. & Waclaw B., Spectral properties of empirical covariance matrices for data with power-law tails, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 74, 041129 (2006)

Fuentes M.A., Kuperman M. & Iglesias J.R., Living in an irrational society: Wealth distribution with correlations between risk and expected profits, Physica A 371, 112-117 (2006)

Tuncay C., Stock mechanics: A general theory and method of energy conservation with applications on DJIA, International Journal of Modern Physics C 17, 1679-1690 (2006)

Huang Z.-G., Wu Z.-X., Guan J.-Y. & Wang Y.-H., Memory-based Boolean game and self-organized phenomena on networks, Chinese Physics Letters 23, 065 (2006)

Yuan B. & Chen K., Impact of investor's varying risk aversion on the dynamics of asset price fluctuations, Journal of Economic Interaction and Coordination 1, 189-214 (2006)

Moyano L.G., de Souza J. & Duarte Queiros S.M., Multi-fractal structure of traded volume in financial markets, Physica A 371, 118-121 (2006)

Boginski V., Butenko S. & Pardalos P.M., Mining market data: A network approach, Computers and Operations Research 33, 3171-3184 (2006)

Donangelo R., Jensen M.H., Simonsen I. & Sneppen K., Synchronization model for stock market asymmetry, Journal of Statistical Mechanics , L11001 (2006)

Perello J., Montero M., Palatella L., Simonsen I. & Masoliver J., Entropy of the Nordic electricity market: Anomalous scaling, spikes & mean-reversion, Journal of Statistical Mechanics , P11011 (2006)

De Martino A. & Marsili M., Statistical mechanics of socio-economic systems with heterogeneous agents, Journal of Physics A 39, R01 (2006)

Ren F., Zheng B., Qiu T. & Trimper S., Minority games with score-dependent and agent-dependent payoffs, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 74, 041111 (2006)

Sornette D. & Zhou W.-X., Importance of positive feedbacks and overconfidence in a self-fulfilling Ising model of financial markets, Physica A 370, 704-726 (2006)

Gomes O., Routes to chaos in macroeconomic theory, Journal of Economic Studies 33, 437-468 (2006)

Travieso G. & Da Fontoura Costa L., Spread of opinions and proportional voting, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 74, 036112 (2006)

Gallegati M., Keen S., Lux T. & Ormerod P., Worrying trends in econophysics, Physica A 370, 1-6 (2006)

Bartolozzi M., Leinweber D.B. & Thomas A.W., Scale-free avalanche dynamics in the stock market, Physica A 370, 132-139 (2006)

Banerjee A., Yakovenko V.M. & Di Matteo T., A study of the personal income distribution in Australia, Physica A 370, 54-59 (2006)

Aste T. & Di Matteo T., Dynamical networks from correlations, Physica A 370, 156-161 (2006)

Johansen A., Simonsen I. & Jensen M.H., Optimal investment horizons for stocks and markets, Physica A 370, 64-67 (2006)

Sherrington D., The minority game: A statistical physics perspective, Physica A 370, 7-11 (2006)

Scalas E., Gallegati M., Guerci E., Mas D. & Tedeschi A., Growth and allocation of resources in economics: The agent-based approach, Physica A 370, 86-90 (2006)

Tibely G., Onnela J.-P., Saramaki J., Kaski K. & Kertesz J., Spectrum, intensity and coherence in weighted networks of a financial market, Physica A 370, 145-150 (2006)

Alfi V., Coccetti F., Marotta M., Pietronero L. & Takayasu M., Hidden forces and fluctuations from moving averages: A test study, Physica A 370, 30-37 (2006)

Marsili M. & Raffaelli G., Risk bubbles and market instability, Physica A 370, 18-22 (2006)

Dong L.-R., A heterogeneous agent herding model with time and space effect, Chinese Physics Letters 23, 067 (2006)

Takayasu M., Mizuno T. & Takayasu H., Potential force observed in market dynamics, Physica A 370, 91-97 (2006)

Platen E., Portfolio selection and asset pricing under a benchmark approach, Physica A 370, 23-29 (2006)

Gillemot L., Farmer J.D. & Lillo F., There's more to volatility than volume, Quantitative Finance 6, 371-384 (2006)

Bacry E., Kozhemyak A. & Muzy J.-F., Are asset return tail estimations related to volatility long-range correlations?, Physica A 370, 119-126 (2006)

Namazi A. & Schadschneider A., Statistical properties of online auctions, International Journal of Modern Physics C 17, 1485-1493 (2006)

Bonanno G., Valenti D. & Spagnolo B., Role of noise in a market model with stochastic volatility, European Physical Journal B 53, 405-409 (2006)

In F. & Kim S., Multiscale hedge ratio between the Australian stock and futures markets: Evidence from wavelet analysis, Journal of Multinational Financial Management 16, 411-423 (2006)

Patriarca M., Chakraborti A. & Germano G., Influence of saving propensity on the power-law tail of the wealth distribution, Physica A 369, 723-736 (2006)

Naumis G.G., del Castillo-Mussot M., Perez L.A. & Vazquez G.J., Phase transition and diffusivity in social hierarchies with attractive sites, Physica A 369, 789-798 (2006)

Bassler K.E., Gunaratne G.H. & McCauley J.L., Markov processes, Hurst exponents & nonlinear diffusion equations: With application to finance, Physica A 369, 343-353 (2006)

Sato A.-H., Frequency analysis of tick quotes on foreign currency markets and the double-threshold agent model, Physica A 369, 753-764 (2006)

Jo H.-H., Jung W.-S. & Moon H.-T., Dynamics of helping behavior and networks in a small world, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 74, 026120 (2006)

Giordano M. & Mannella R., A brief analysis of may 2004 crash in the Indian market, Fluctuation and Noise Letters 6, - (2006)

Hu M.-B., Wang W.-X., Jiang R., Wu Q.-S., Wang B.-H. & Wu Y.-H., A unified framework for the pareto law and Matthew effect using scale-free networks, European Physical Journal B 53, 273-277 (2006)

Assaf A., Dependence and mean reversion in stock prices: The case of the MENA region, Research in International Business and Finance 20, 286-304 (2006)

Scalas E., Garibaldi U. & Donadio S., Statistical equilibrium in simple exchange games I : Methods of solution and application to the Bennati-Dragulescu-Yakovenko (BDY) game, European Physical Journal B 53, 267-272 (2006)

Jin H. & Lu J.Z., Origins of the multifractality in Shanghai Stock Market, Nuovo Cimento della Societa Italiana di Fisica B 121, 987-994 (2006)

Katz J.S., Indicators for complex innovation systems, Research Policy 35, 893-909 (2006)

Matsuba I., Takahashi H. & Wakasa S., Stochastically equivalent dynamical system approach to nonlinear deterministic prediction, International Journal of Bifurcation and Chaos 16, 2721-2728 (2006)

Telesca L. & Lapenna V., Measuring multifractality in seismic sequences, Tectonophysics 423, 115-123 (2006)

Bischi G.-I., Gallegati M., Gardini L., Leombruni R. & Palestrini A., Herd behavior and nonfundamental asset price fluctuations in financial markets, Macroeconomic Dynamics 10, 502-528 (2006)

Lee S.H. & Jeong H., Effects of substrate network topologies on competition dynamics, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 74, 026118 (2006)

Leontitsis A. & Vorlow C.E., Accounting for outliers and calendar effects in surrogate simulations of stock return sequences, Physica A 368, 522-530 (2006)

Mohanty P.K., Generic features of the wealth distribution in ideal-gas-like markets, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 74, 011117 (2006)

Ichinomiya T., Power-law distribution in Japanese racetrack betting, Physica A 368, 207-213 (2006)

Piotrowski E.W., Schroeder M. & Zambrzycka A., Quantum extension of European option pricing based on the Ornstein-Uhlenbeck process, Physica A 368, 176-182 (2006)

Pan H., Sornette D. & Kortanek K., Intelligent finance - An emerging direction, Quantitative Finance 6, 273-277 (2006)

Sato A.-H. & Oshiro J., Quantifying similarity between markets with application to high frequency financial data, Journal of the Physical Society of Japan 75, 084005 (2006)

Raffaelli G. & Marsili M., Dynamic instability in a phenomenological model of correlated assets, Journal of Statistical Mechanics , L08001 (2006)

Pareschi L. & Toscani G., Self-similarity and power-like tails in nonconservative kinetic models, Journal of Statistical Physics 124, 747-779 (2006)

Preis T., Golke S., Paul W. & Schneider J.J., Multi-agent-based Order Book Model of financial markets, Europhysics Letters 75, 510-516 (2006)

Cajueiro D.O. & De Camargo R.S., Minority game with local interactions due to the presence of herding behavior, Physics Letters, Section A 355, 280-284 (2006)

Jun W.C., Oh G. & Kim S., Understanding volatility correlation behavior with a magnitude cross-correlation function, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 73, 066128 (2006)

Ohkubo J., Yasuda M. & Tanaka K., Replica analysis of preferential urn model, Journal of the Physical Society of Japan 75, 074802 (2006)

Reikard G.E., Simultaneity and non-linear variability in financial markets: Simulation and forecasting, Applied Stochastic Models in Business and Industry 22, 371-383 (2006)

Weber P. & Rosenow B., Large stock price changes: Volume or liquidity?, Quantitative Finance 6, 7-14 (2006)

Bartolozzi M., Leinweber D.B. & Thomas A.W., Symbiosis in the Bak-Sneppen model for biological evolution with economic applications, Physica A 365, 499-508 (2006)

Alvarez-Ramirez J. & Rodriguez E., Scaling properties of marathon races, Physica A 365, 509-520 (2006)

Yang I. & Kahng B., Bidding process in online auctions and winning strategy: Rate equation approach, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 73, 067101 (2006)

Ball P., Culture crash, Nature 441, 686-688 (2006)

Bagarello F., An operatorial approach to stock markets, Journal of Physics A 39, 6823-6840 (2006)

Stanley H.E., Gabaix X., Gopikrishnan P. & Plerou V., Economic fluctuations and statistical physics: The puzzle of large fluctuations, Nonlinear Dynamics 44, 329-340 (2006)

Johnson N.F., Smith D.M.D. & Hui P.M., Multi-agent complex systems and many-body physics, Europhysics Letters 74, 923-929 (2006)

Jafari G.R., Movahed M.S., Fazeli S.M., Reza Rahimi Tabar M. & Masoudi S.F., Level crossing analysis of the stock markets, Journal of Statistical Mechanics , P06008 (2006)

Mostardinha P., Durana E.J. & Vistulo De Abreu F., The econophysics in the Euromillions lottery, European Journal of Physics 27, 675-684 (2006)

Ishikawa A., Pareto index induced from the scale of companies, Physica A 363, 367-376 (2006)

Yang J.-S., Chae S., Jung W.-S. & Moon H.-T., Microscopic spin model for the dynamics of the return distribution of the Korean stock market index, Physica A 363, 377-382 (2006)

Dahui W., Li Z. & Zengru D., Bipartite producer-consumer networks and the size distribution of firms, Physica A 363, 359-366 (2006)

Casillas L., Espinosa F.J., Huerta-Quintanilla R. & Rodriguez-Achach M., Condensation in an economic model with brand competition, International Journal of Modern Physics C 17, 749-756 (2006)

Aoki M. & Yoshikawa H., Stock prices and the real economy: Power law versus exponential distributions, Journal of Economic Interaction and Coordination 1, 45-73 (2006)

Ellis C., The mis-specification of the expected rescaled adjusted range, Physica A 363, 469-476 (2006)

Decamps M., De Schepper A. & Goovaerts M., A path integral approach to asset-liability management, Physica A 363, 404-416 (2006)

Eisler Z. & Kertesz J., Size matters: Some stylized facts of the stock market revisited, European Physical Journal B 51, 145-154 (2006)

Wohlmuth J. & Andersen J.V., Modelling financial markets with agents competing on different time scales and with different amount of information, Physica A 363, 459-468 (2006)

Alejandro-Quinones A.L., Bassler K.E., Field M., McCauley J.L., Nicol M., Timofeyev I., Torok A. & Gunaratne G.H., A theory of fluctuations in stock prices, Physica A 363, 383-392 (2006)

Gabaix X., Gopikrishnan P., Plerou V. & Stanley H.E., Institutional investors and stock market volatility, Quarterly Journal of Economics 121, 461-504 (2006)

Groot R.D., Consumers don't play dice, influence of social networks and advertisements, Physica A 363, 446-458 (2006)

Strozzi F. & Comenges J.-M.Z., Towards a non-linear trading strategy for financial time series, Chaos, Solitons and Fractals 28, 601-615 (2006)

Serva M., Fulco U.L., Gleria I.M., Lyra M.L., Petroni F. & Viswanathan G.M., A Markov model of financial returns, Physica A 363, 393-403 (2006)

Eisler Z. & Kertesz J., Scaling theory of temporal correlations and size-dependent fluctuations in the traded value of stocks, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 73, 046109 (2006)

Roman H.E., Albergante M., Colombo M., Croccolo F., Marini F. & Riccardi C., Modeling cross correlations within a many-assets market, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 73, 036129 (2006)

Scalas E., The application of continuous-time random walks in finance and economics, Physica A 362, 225-239 (2006)

Gavrishchaka V.V. & Banerjee S., Support vector machine as an efficient framework for stock market volatility forecasting, Computational Management Science 3, 147-160 (2006)

Bouchaud J.-P., Kockelkoren J. & Potters M., Random walks, liquidity molasses and critical response in financial markets, Quantitative Finance 6, 115-123 (2006)

Yamamoto H., Ohtsuki T., Fujihara A. & Tanimoto S., Power-law and runaway growth in conserved aggregation systems, Journal of Physics 31, 59-62 (2006)

Wang F., Yamasaki K., Havlin S. & Stanley H.E., Scaling and memory of intraday volatility return intervals in stock markets, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 73, 026117 (2006)

Dionisio A., Menezes R. & Mendes D.A., An econophysics approach to analyse uncertainty in financial markets: An application to the Portuguese stock market, European Physical Journal B 50, 161-164 (2006)

Horvath D., Gmitra M. & Kuscsik Z., A self-adjusted Monte Carlo simulation as a model for financial markets with central regulation, Physica A 361, 589-605 (2006)

Ortega G.J. & Matesanz D., Cross-country hierarchical structure and currency crises, International Journal of Modern Physics C 17, 333-341 (2006)

Miskiewicz J. & Ausloos M., An attempt to observe economy globalization: The cross correlation distance evolution of the top 19 GDP'S, International Journal of Modern Physics C 17, 317-331 (2006)

Darooneh A.H., Utility function from maximum entropy principle, Entropy 8, 18-24 (2006)

Kitt R. & Kalda J., Leptokurtic portfolio theory, European Physical Journal B 50, 141-145 (2006)

Caridi I. & Ceva H., States and microstates in a mean-field approach to the minority game and its generalizations, International Journal of Modern Physics C 17, 373-383 (2006)

Westerhoff F.H., Technical analysis based on price-volume signals and the power of trading breaks, International Journal of Theoretical and Applied Finance 9, 227-244 (2006)

Melnyk S.S., Usatenko O.V. & Yampol'skii V.A., Memory functions of the additive Markov chains: Applications to complex dynamic systems, Physica A 361, 405-415 (2006)

De Souza J., Moyano L.G. & Duarte Queiros S.M., On statistical properties of traded volume in financial markets, European Physical Journal B 50, 165-168 (2006)

Cai S.-M., Zhou P.-L., Yang H.-J., Yang C.-X., Wang B.-H. & Zhou T., Empirical study on the volatility of the hang-seng index, Chinese Physics Letters 23, 754-757 (2006)

Bordogna C.M. & Albano E.V., Phase transitions in a social impact model for opinion formation, International Journal of Modern Physics C 17, 409-418 (2006)

Sato A.-H., Characteristic time scales of tick quotes on foreign currency markets: An empirical study and agent-based model, European Physical Journal B 50, 137-140 (2006)

Kaizoji T., A precursor of market crashes: Empirical laws of Japan's internet bubble, European Physical Journal B 50, 123-127 (2006)

Vicente R., De Toledo C.M., Leite V.B.P. & Caticha N., Underlying dynamics of typical fluctuations of an emerging market price index: The Heston model from minutes to months, Physica A 361, 272-288 (2006)

Jung W.-S., Chae S., Yang J.-S. & Moon H.-T., Characteristics of the Korean stock market correlations, Physica A 361, 263-271 (2006)

Zhou W.-X. & Sornette D., Is there a real-estate bubble in the US?, Physica A 361, 297-308 (2006)

Rodriguez-Achach M. & Huerta-Quintanilla R., The distribution of wealth in the presence of altruism in simple economic models, Physica A 361, 309-318 (2006)

Ehrenstein G. & Westerhoff F., The working of circuit breakers within percolation models for financial markets, International Journal of Modern Physics C 17, 299-304 (2006)

Zhou W.-X. & Sornette D., Fundamental factors versus herding in the 2000-2005 US stock market and prediction, Physica A 360, 459-482 (2006)

Ribeiro L.C., Ruiz R.M., Albuquerque E.M. & Bernardes A.T., National systems of innovation and technological differentiation: A multi-country model, International Journal of Modern Physics C 17, 247-257 (2006)

Andrecut M., A simple forecasting game, International Journal of Modern Physics C 17, 279-286 (2006)

Gong F.F., Gong F.X. & Gong F.Y., Open dynamic behaviour of financial markets, European Physical Journal B 49, 267-268 (2006)

Malevergne Y., Pisarenko V. & Sornette D., On the power of generalized extreme value (GEV) and generalized Pareto distribution (GPD) estimators for empirical distributions of stock returns, Applied Financial Economics 16, 271-289 (2006)

Tastan H., Estimating time-varying conditional correlations between stock and foreign exchange markets, Physica A 360, 445-458 (2006)

Hurtado P.I., Marro J. & Garrido P.L., Understanding scale invariance in a minimal model of complex relaxation phenomena, Journal of Statistical Mechanics , 93-105 (2006)

Goncalves L.L. & Goncalves L.B., Fractal power law in literary English, Physica A 360, 557-575 (2006)

Toth B. & Kertesz J., Increasing market efficiency: Evolution of cross-correlations of stock returns, Physica A 360, 505-515 (2006)

Boccaletti S., Latora V., Moreno Y., Chavez M. & Hwang D.-U., Complex networks: Structure and dynamics, Physics Reports 424, 175-308 (2006)

Movahed M.S., Jafari G.R., Ghasemi F., Rahvar S. & Tabar M.R.R., Multifractal detrended fluctuation analysis of sunspot time series, Journal of Statistical Mechanics , 75-91 (2006)

Jo H.-H., Jung W.-S. & Moon H.-T., Rescue model for the bystanders' intervention in emergencies, Europhysics Letters 73, 306-312 (2006)

Olemskoi A. & Kokhan S., Effective temperature of self-similar time series: Analytical and numerical developments, Physica A 360, 37-58 (2006)

Gupta A.K., Money exchange model and a general outlook, Physica A 359, 634-640 (2006)

Gunner S.M., Brooks L. & Storer R.G., Asymmetry of returns in the australian stock market, International Journal of Modern Physics C 17, 147-153 (2006)

Ferraro M., Furman N., Liu Y., Mariani C. & Rial D., Analysis of intermittence, scale invariance and characteristic scales in the behavior of major indices near a crash, Physica A 359, 576-588 (2006)

Hernandez-Perez R., Angulo-Brown F. & Tun D., Company size distribution for developing countries, Physica A 359, 607-618 (2006)

Sinha S., Evidence for power-law tail of the wealth distribution in India, Physica A 359, 555-562 (2006)

Sornette D. & Zhou W.-X., Predictability of large future changes in major financial indices, International Journal of Forecasting 22, 153-168 (2006)

Yoon S.-M., Choi J.S., Christopher Lee C., Yum M.-K. & Kim K., Dynamical volatilities for yen-dollar exchange rates, Physica A 359, 569-575 (2006)

Wu M.-C., Huang M.-C., Yu H.-C. & Chiang T.C., Phase distribution and phase correlation of financial time series, Physical Review E - Statistical, Nonlinear & Soft Matter Physics 73, 016118 (2006)

Yoon S.-M., Choi J.S., Kim Y. & Kim K., Phase transition of dynamical herd behaviors for Yen-Dollar exchange rates, Physica A 359, 563-568 (2006)