Introduction to Economic Physics - Correlation and Complexity in Finance

Author: Man
Publisher:
Publish Date: 2006-01-01
Features: This book discusses how to apply the concepts of statistical physics to describe financial systems. Specifically, the author first explains the concepts of scaling, which are widely used in probability theory, critical phenomenon physics, and mature turbulence theory. Then, these concepts are applied to analyze financial time series to gain a new understanding of market behavior. The author also provides a new stochastic model to demonstrate several statistical features observed in empirical data.
When studying economic systems, it is entirely possible to examine them using different scales. However, obtaining precise equations that describe the interactions of economic entities within a specific system is often impossible. Concepts from statistical physics, such as stochastic dynamics, short-range and long-range correlations, self-similarity, and scaling, can provide an understanding of the global behavior of an economic system without requiring a detailed and refined description of the system in advance.
This book caters to the interests of physicists and economists. Since economic systems are among the most attractive complex systems we can study, physicists will find both interest and challenges in applying statistical physics concepts to economic systems. Economists and finance professionals will find the empirical analysis methods and clearly articulated theoretical tools provided here very useful, as they will help describe complex systems composed of numerous interacting subsystems.
This book is designed for graduate-level economics or physics students and researchers, as well as finance professionals. Undergraduate students with a comparative familiarity with probability theory and statistical physics will also be able to read this book.