We present an empirical study of the intertwined behaviour of members in a financial market. Exploiting a database where the broker that initiates an order book event can be identified, we decompose the correlation and response functions into contributions coming from different market...

Markowitz' celebrated optimal portfolio theory generally fails to deliver out-of-sample diversification. In this note, we propose a new portfolio construction strategy based on symmetry arguments only, leading "Eigenrisk Parity" portfolios that achieve equal realized risk on all the principal...

We propose a highly schematic economic model in which, in some cases, wage inequalities lead to higher overall social welfare. This is due to the fact that high earners can consume low productivity, non essential products, which allows everybody to remain employed even when the productivity of...

Financial markets display a host of universal “stylized facts” begging for a scientific explanation: Excess volatility, fat tails, and clustered activity are well known and have been studied for many years. More microstructural stylized facts have recently emerged, for example the long...

Quadratic Hawkes (QHawkes) processes have proved effective at reproducing the statistics of price changes, capturing many of the stylised facts of financial markets. Motivated by the recently reported strong occurrence of endogenous co-jumps (simultaneous price jumps of several assets) we extend...

The Slutsky equation, central in consumer choice theory, is derived from the usual hypotheses underlying most standard models in Economics, such as full rationality, homogeneity, and absence of interactions. We present a statistical physics framework that allows us to relax such assumptions. We...

The stability condition for Hawkes processes and their non-linear extensions usually relies on the condition that the mean intensity is a finite constant. It follows that the total endogeneity ratio needs to be strictly smaller than unity.In the present note we argue that it is possible to have...

We introduce a Path Shadowing Monte-Carlo method, which provides prediction of future paths, given any generative model. At any given date, it averages future quantities over generated price paths whose past history matches, or `shadows', the actual (observed) history. We test our approach using...

The economic shocks that followed the COVID-19 pandemic have brought to light the difficulty, both for academics and policy makers, of describing and predicting the dynamics of inflation. This paper offers an alternative modelling approach. We study the 2020-2023 period within the well-studied...