For an intriguing variety of switching processes in natural networks, the underlying complex
system abruptly changes at a specific “phase transition” point from one state to another in a
highly discontinuous fashion. Examples of phase transitions range from magnetism in statis-
tical physics to physiology and macroscopic social phenomena. Financial market fluctuations
are characterized by many abrupt switchings on very short time scales from increasing “mi-
crotrends” to decreasing “microtrends”—and vice versa. We ask whether these ubiquitous
switching processes have quantifiable features analogous to those present in phase transitions,
and find striking scale-free behavior of the time intervals between transactions both before
and after the switching occurs. [HES/T. Preis/J. J. Schneider “New Laws Describing Trend
Switching Processes in Financial Markets”, submitted]. We interpret our findings as being
consistent with time-dependent collective behavior of financial market participants. We test
the possible universality of our result by performing a parallel analysis of transaction volume
fluctuations.
This work was carried out in collaboration with T. Preis (Mainz) and J. J. Schneider (Mainz).