Santa Fe Institute

About: Santa Fe Institute is a nonprofit organization based out in Santa Fe, New Mexico, United States. It is known for research contribution in the topics: Population & Context (language use). The organization has 558 authors who have published 4558 publications receiving 396015 citations. The organization is also known as: SFI.

The predictive power of zero intelligence in financial markets.

Abstract: Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where constraints imposed by market institutions dominate strategic agent behavior. We use data from the London Stock Exchange to test a simple model in which minimally intelligent agents place orders to trade at random. The model treats the statistical mechanics of order placement, price formation, and the accumulation of revealed supply and demand within the context of the continuous double auction and yields simple laws relating order-arrival rates to statistical properties of the market. We test the validity of these laws in explaining cross-sectional variation for 11 stocks. The model explains 96% of the variance of the gap between the best buying and selling prices (the spread) and 76% of the variance of the price diffusion rate, with only one free parameter. We also study the market impact function, describing the response of quoted prices to the arrival of new orders. The nondimensional coordinates dictated by the model approximately collapse data from different stocks onto a single curve. This work is important from a practical point of view, because it demonstrates the existence of simple laws relating prices to order flows and, in a broader context, suggests there are circumstances where the strategic behavior of agents may be dominated by other considerations.

Variation in Sexual Violence during War

Abstract: Sexual violence during war varies in extent and takes distinct forms. In some conflicts, sexual violence is widespread, yet in other conflicts—including some cases of ethnic conflict—it is quite limited. In some conflicts, sexual violence takes the form of sexual slavery; in others, torture in detention. I document this variation, particularly its absence in some conflicts and on the part of some groups. In the conclusion, I explore the relationship between strategic choices on the part of armed group leadership, the norms of combatants, dynamics within small units, and the effectiveness of military discipline.

Universality in intermediary metabolism

Abstract: We analyze the stoichiometry, energetics, and reaction concentration dependence of the reductive tricarboxylic acid (rTCA) cycle as a universal and possibly primordial metabolic core. The rTCA reaction sequence is a network-autocatalytic cycle along the relaxation pathway for redox couples in nonequilibrium reducing environments, which provides starting organic compounds for the synthesis of all major classes of biomolecules. The concentration dependence of its reactions suggests it as a precellular bulk process. We propose that rTCA is statistically favored among competing redox relaxation pathways under early-earth conditions and that this feature drove its emergence and also accounts for its evolutionary robustness and universality. The ability to enhance the rate of core reactions creates an energetic basis for selection of subsequent layers of biological complexity.

Market force, ecology and evolution

Abstract: Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context of trading with market orders. Because this is so much simpler than a standard inter-temporal equilibrium model, it is possible to study multi-period markets analytically. There price dynamics have second order oscillatory terms. Value investing does not necessarily cause prices to track values. Trend following causes short term trends in prices, but also causes longer-term oscillations. When value investing and trend following are combined, even though there is little linear structure, there can be boom-bust cycles,excess and temporally correlated volatility, and fat tails in price fluctuations. The long term evolution of markets can be studied in terms of flows of money. Profits can be decomposed in terms of aggregate pairwise correlations. Under reinvestment of profits this leads to a capital allocation model that is equivalent to a standard model in population biology. An investigation of market efficiency shows that patterns created by trend followers are more resistant to efficiency than those created by value investors, and that profit maximizing behavior slows the progression to efficiency. Order of magnitude estimates suggest that the timescale for efficiency is years to decades.

Complexity: Metaphors, Models, and Reality

Abstract: Fundamental Concepts Examples of Complex Adaptive Systems Nonadaptive Systems, Scaling, Self-Similarity, and Measures of Complexity General Discussion Afterwords.