A statistical physics perspective on criticality in financial markets
Statistical Finance
2015-06-17 v3 Data Analysis, Statistics and Probability
Abstract
Stock markets are complex systems exhibiting collective phenomena and particular features such as synchronization, fluctuations distributed as power-laws, non-random structures and similarity to neural networks. Such specific properties suggest that markets operate at a very special point. Financial markets are believed to be critical by analogy to physical systems but few statistically founded evidence have been given. Through a data-based methodology and comparison to simulations inspired by statistical physics of complex systems, we show that the Dow Jones and indices sets are not rigorously critical. However, financial systems are closer to the criticality in the crash neighborhood.
Cite
@article{arxiv.1310.2446,
title = {A statistical physics perspective on criticality in financial markets},
author = {Thomas Bury},
journal= {arXiv preprint arXiv:1310.2446},
year = {2015}
}
Comments
23 pages, 19 figures