Related papers: Toward Economics as a New Complex System
Economic theory is a mathematically rich field in which there are opportunities for the formal analysis of singularities and catastrophes. This article looks at the historical context of singularities through the work of two eminent…
We discuss - in what is intended to be a pedagogical fashion - a criterion, which is a lower bound on a certain ratio, for when a stock (or a similar instrument) is not a good investment in the long term, which can happen even if the…
This paper reviews recent attempts at modelling inequality of wealth as an emergent phenomenon of interacting-agent processes. We point out that recent models of wealth condensation which draw their inspiration from molecular dynamics have,…
A general theory of innovation and progress in human society is outlined, based on the combat between two opposite forces (conservatism/inertia and speculative herding "bubble" behavior). We contend that human affairs are characterized by…
We study the statistics of earning forecasts of US, EU, UK and JP stocks during the period 1987-2004. We confirm, on this large data set, that financial analysts are on average over-optimistic and show a pronounced herding behavior. These…
Physicists have recently begun doing research in finance, and even though this movement is less than five years old, interesting and useful contributions have already emerged. This article reviews these developments in four areas, including…
When analyzing the components influencing the stock prices, it is commonly believed that economic activities play an important role. More specifically, asset prices are more sensitive to the systematic economic news that impose a pervasive…
In this paper I empirically investigate prediction markets for binary options. Advocates of prediction markets have suggested that asset prices are consistent estimators of the "true" probability of a state of the world being realized. I…
One of the major issues studied in finance that has always intrigued, both scholars and practitioners, and to which no unified theory has yet been discovered, is the reason why prices move over time. Since there are several well-known…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
In this paper, we propose a minimal model beyond geometric Brownian motion that aims to describe price actions with market inefficiency. From simple financial theory considerations, we arrive at a simple two-variable hidden Markovian time…
Peters (2011a) defined an optimal leverage which maximizes the time-average growth rate of an investment held at constant leverage. It was hypothesized that this optimal leverage is attracted to 1, such that, e.g., leveraging an investment…
This article aims at reviewing recent empirical and theoretical developments usually grouped under the term Econophysics. Since its name was coined in 1995 by merging the words Economics and Physics, this new interdisciplinary field has…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…
We revisit the dynamic relationship between domestic economic policy uncertainty and stock markets using the symmetric thermal optimal path (TOPS) method. We observe different interaction patterns in emerging and developed markets. Economic…
We construct a model of an exchange economy in which agents trade assets contingent on an observable signal, the probability of which depends on public opinion. The agents in our model are replaced occasionally and each person updates…
We explore the effects of social influence in a simple market model in which a large number of agents face a binary choice: 'to buy/not to buy' a single unit of a product at a price posted by a single seller (the monopoly case). We consider…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
Digital marketplaces processing billions of dollars annually represent critical infrastructure in sociotechnical ecosystems, yet their performance optimization lacks principled measurement frameworks that can inform algorithmic governance…
This study investigates empirically whether the degree of stock market efficiency is related to the prediction power of future price change using the indices of twenty seven stock markets. Efficiency refers to weak-form efficient market…