Recently, I've been searching my own website looking for notes of things I wrote ages ago. This is proof of three things: one, I'm an idiot, two, my website is actually more useful to me as an archive than you, the casual reader, and three, I spend waaay too much time on the net.
So, robbing a great idea from Cosma Shalizi, I'm sticking my notes to myself on the web and archiving them in a new page, called Notes to Self.
Here we go.
Econophysics is the application of the modeling methodologies used in physics to the study of economic processes.
Because physicists have highly developed data modeling skills, they think it makes sense to study the stock market, or other large volume, high frequency markets, using these tools.
The term econophysics was coined in the late 1990's by Eugene Stanley.
Read:
X. Gabaix, P. Gopikrishnan, V. Plerou, and H. E. Stanley, "Quantifying and Understanding the Economics of Large Financial Movements," Journal of Economic Dynamics and Control (JEDC) 32[1], 303-319 (2008). (link)
Extreme events aren't really extreme and outliers aren't really outliers: they are are instances of the real world, and economists should model them as such.
J. Growiec, F. Pammolli, M. Riccaboni, and H. E. Stanley, "On the Size Distribution of Business Firms," Economics Lett. 98[2], 207-212 (2008). (link)
Proposes a new measure for size distributions of business firms: lognormal generation plus a stretching component to bring about the Pareto-distribution we see in real world data on firm sizes. Don't know how much I believe this, but its a nice paper.
V. Plerou and H. E. Stanley, "Tests of Scaling and Universality of the Distributions of Trade Size and Share Volume: Evidence from Three Distinct Markets," Phys. Rev. E 76, 046109 (2007). (link)
Classic data-driven paper, the point of which is: scaling and universality are present in loads of different markets.
X. Gabaix, P. Gopikrishnan, V. Plerou, and H. E. Stanley, "A Unified Econophysics Explanation for the Power-Law Exponents of Stock Market Activity" [Proc. APFA-5, Torino], Physica A 382, 81-88 (2007). (link)
Really nice summary paper of the above results.
McCauley, Joseph l., 2004. "Thermodynamic analogies in economics and finance: instability of markets," MPRA Paper 2159, University Library of Munich, Germany, revised
McCauley, Joseph L., 2004. "Making dynamic modelling effective in economics," MPRA Paper 2130, University Library of Munich, Germany, revised .
McCauley, Joseph L. & Küffner, Cornelia M., 2004. "Economic system dynamics," MPRA Paper 2158, University Library of Munich, Germany, revised .
"Dynamics of Markets: Econophysics and Finance" (Joseph L. McCauley)
Not a primer on econophysics, more a collection of results. The definitive introduction has yet to be written.
To Read:
"Patterns of Speculation: A Study in Observational Econophysics" (Bertrand M. Roehner)
G. Daniel, D. Sornette, Econophysics: historical perspectives, arXiv:0802.1416v1 [physics.soc-ph] (link)
A Mathematical Formalism for Agent-based Modeling, Reinhard Laubenbacher, Abdul S. Jarrah, Henning Mortveit, and S.S. Ravi, DOI: 0801.0249, arXiv, 2007/12/31
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