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How market ecology explains market malfunction.

ABSTRACT: Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is like the abundance of a species. We study a toy model of a market consisting of value investors, trend followers, and noise traders. We show that the average returns of strategies are strongly density dependent; that is, they depend on the wealth invested in each strategy at any given time. In the absence of noise, the market would slowly evolve toward an efficient equilibrium, but the statistical uncertainty in profitability (which is calibrated to match real markets) makes this noisy and uncertain. Even in the long term, the market spends extended periods of time away from perfect efficiency. We show how core concepts from ecology, such as the community matrix and food webs, give insight into market behavior. For example, at the efficient equilibrium, all three strategies have a mutualistic relationship, meaning that an increase in the wealth of one increases the returns of the others. The wealth dynamics of the market ecosystem explain how market inefficiencies spontaneously occur and gives insight into the origins of excess price volatility and deviations of prices from fundamental values.

SUBMITTER: Scholl MP

PROVIDER: S-EPMC8256038 | biostudies-literature | 2021 Jun

REPOSITORIES: biostudies-literature

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How market ecology explains market malfunction.

Scholl Maarten P MP Calinescu Anisoara A Farmer J Doyne JD

Proceedings of the National Academy of Sciences of the United States of America 20210601 26

Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is like the abundance of a species. We study a toy model of a market consisting of value investors, trend followers, and noise traders. We show that the average returns of strategies are strongly density dependent; that is, they depend on the wealth invested in eac ...[more]

PMID: 34172576

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Project description:Background and Objective: Indirect hepatotoxicity is a new type of drug-induced hepatotoxicity in which the character of a drug that may induce its occurrence and the underlying mechanism remains elusive. Previously, we proved that Triptolide (TP) induced indirect hepatotoxicity upon LPS stimulation resulting from the deficiency of cytoprotective protein of hepatocyte. However, whether immune cells participated in TP-induced indirect hepatotoxicity and the way immune cells change the liver hypersensitivity to LPS still need to be deeply investigated. In this study, we tried to explore whether and how macrophages are involved in TP-induced indirect hepatotoxicity. Method: Firstly, TP (500 μg/kg) and LPS (0.1 mg/kg) were administrated into female C57BL/6 mice as previously reported. Serum biochemical indicators, morphological changes, hepatic macrophage markers, as well as macrophage M1/M2 markers were detected. Secondly, macrophage scavenger clodronate liposomes were injected to prove whether macrophages participated in TP-induced indirect hepatotoxicity. Also, the ability of macrophages to secrete inflammatory factors and macrophage phagocytosis were detected. Lastly, reverse docking was used to find the target of TP on macrophage and the possible target was verified in vivo and in RAW264.7 cells. Results: TP pretreatment increased the liver hypersensitization to LPS accompanied by the recruitment of macrophages to the liver and promoted the transformation of macrophages to M1 type. Depletion of hepatic macrophages almost completely alleviated the liver injury induced by TP/LPS. TP pretreatment increased the secretion of pro-inflammatory factors and weakened the phagocytic function of macrophages upon LPS exposure. Reverse docking results revealed that MerTK might be the real target of TP. Conclusion: TP disrupts inflammatory cytokines profile and phagocytic function of hepatic macrophages, resulting in the production of massive inflammatory factors and the accumulation of endotoxin in the liver, ultimately leading to the indirect hepatotoxicity of TP. MerTK might be the target of TP on the macrophage, while the binding of TP to MerTK should be investigated in vivo and in vitro.

Project description:Background and aimsThe centre-periphery hypothesis posits that higher species performance is expected in geographic and ecological centres rather than in peripheral populations. However, this is not the commonly found pattern; therefore, alternative approaches, including the historical dimension of species geographical ranges, should be explored. Morphological functional traits are fundamental determinants of species performance, commonly related to environmental stability and productivity. We tested whether or not historical processes may have shaped variations in tree and leaf traits of the Chaco tree Bulnesia sarmientoi.MethodsMorphological variation patterns were analysed from three centre-periphery approaches: geographical, ecological and historical. Tree (stem and canopy) and leaf (leaf size and specific leaf area) traits were measured in 24 populations across the species range. A principal component analysis was performed on morphological traits to obtain synthetic variables. Linear mixed-effects models were used to test which of the implemented centre-periphery approaches significantly explained trait spatial patterns.Key resultsThe patterns retrieved from the three centre-periphery approaches were not concordant. The historical approach revealed that trees were shorter in centre populations than in the periphery. Significant differences in leaf traits were observed between the geographical centre and the periphery, mainly due to low specific leaf area values towards the geographical centre. We did not find any pattern associated with the ecological centre-periphery approach.ConclusionsThe decoupled response between leaf and tree traits suggests that these sets of traits respond differently to processes occurring at different times. The geographical and historical approaches showed centres with extreme environments in relation to their respective peripheries, but the historical centre has also been a climatically stable area since the Last Glacial Maximum. The historical approach allowed for the recovery of historical processes underlying variation in tree traits, highlighting that centre-periphery delimitations should be based on a multi-approach framework.

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How market ecology explains market malfunction.

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How market ecology explains market malfunction.

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