Andri Rahmadhani Department of Physics ITB KAIST Internship Program Summer 2012

Basic Theory Method & Algorithm Simulation Results Conclusions Future Work References

What is power laws? Describe relationship between two quantities which have some power attributes corresponding between them. Examples:
Wealth of richest people Populations of cities

Mathematical form: ; =

and are constants

Figure 1. Histogram of the populations of all US cities (left: linear scale, right: log-log scale)

Random Walks is one of mechanism to generate power-law distributions Gamblers ruin problem (ends when it hits zero) has a power-law distribution of possible lifetimes The walk can only returned to initial position (i.e. zero) at even t value and t 0 Define as the probability of first return at time t Math. relation (for large steps & trials):

~ ;3/2

First return at t = 18

First return at t = 2
Value

-5

-10

-15

-20

10 1st trial

20

30 2nd trial

40 3rd trial

50 Steps (N)

60

70

80 9999th trial

90

100

9998th trial

10000th trial

Figure 2. Random walk for 100 steps with 10000 trials

Simulation using Matlab Graphs generation using Ms. Excel Algorithm of Random Walk -> Power Laws
1) Set the number of steps, trials, random variable, and probability of random variable 2) Generate random number and moves 3) Make new variable that will be filled with the number of first return at time t (even t time only) 4) Repeat step 2 for n times which already set up in step 1 5) Plot number of first return vs time t (linear and log scale) 6) Export data for graphing purpose

Table 1. Number of first return at time t (ft) for random walk with 100 steps and10000 trials

Linear Scale

Figure 3. Number of first return at time t for 100 steps of random walk with 10000 trials (linear scale)

Linear Scale

Figure 4. Number of first return at time t for 100 steps of random walk with 10000 trials (linear scale) - discrete

Log-Log Scale

Figure 5. Number of first return at time t for 100 steps of random walk with 10000 trials (log-log scale)

Log-Log Scale

Figure 6. Number of first return at time t for 100 steps of random walk with 10000 trials (log-log scale) discrete

Linear Scale
= = 10217 ;1.558
2 = 0.974

Log-Log Scale
ln = ln + ln = 1.558 ln + 9.2318 ln = ;1.558 ln :9.2318 = 10217 ;1.558
2 = 0.974

Random walk can be used as one of the mechanism to generate power-law distributions For large steps and trials, the probability of first return (to initial position, i.e. zero) can be expressed in terms of power, that is ~ ;3/2

Power law is a basic theory to understand complex networks Complex networks can be used as financial market model This model can be used to compare performance and resilience between islamic financial market and conventional market

Newman, M. E. J. (2005). "Power laws, Pareto distributions and Zipf's law". Contemporary Physics 46 (5): 323351. arXiv:condmat/0412004. DOI:10.1080/00107510500052444. Aaron Clauset, Cosma Rohilla Shalizi, M. E. J. Newman (2009). "Power-law distributions in empirical data". SIAM Review 51 (4): 661703. arXiv:0706.1062v2. DOI:10.1137/070710111

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