Introduction to Econophysics: Correlations and Complexity in Finance / Edition 1

by Rosario N. Mantegna, H. Eugene Stanley

Overview

Statistical physics concepts such as stochastic dynamics, short- and long-range correlations, self-similarity and scaling, permit an understanding of the global behavior of economic systems without first having to work out a detailed microscopic description of the system. This pioneering text explores the use of these concepts in the description of financial systems, the dynamic new specialty of econophysics. The authors illustrate the scaling concepts used in probability theory, critical phenomena, and fully-developed turbulent fluids and apply them to financial time series. They also present a new stochastic model that displays several of the statistical properties observed in empirical data. Physicists will find the application of statistical physics concepts to economic systems fascinating. Economists and other financial professionals will benefit from the book's empirical analysis methods and well-formulated theoretical tools that will allow them to describe systems composed of a huge number of interacting subsystems.

Product Details

ISBN-13:	9780521620086
Publisher:	Cambridge University Press
Publication date:	11/13/1999
Edition description:	New Edition
Pages:	162
Product dimensions:	7.17(w) x 10.04(h) x 0.75(d)

Table of Contents

Preface; 1. Introduction; 2. Efficient market hypothesis; 3. Random walk; 4. Lévy stochastic processes and limit theorems; 5. Scales in financial data; 6. Stationarity and time correlation; 7. Time correlation in financial time series; 8. Stochastic models of price dynamics; 9. Scaling and its breakdown; 10. ARCH and GARCH processes; 11. Financial markets and turbulence; 12. Correlation and anti-correlation between stocks; 13. Taxonomy of a stock portfolio; 14. Options in idealized markets; 15. Options in real markets; Appendix A: notation guide; Appendix B: martingales; References; Index.

Editorial Reviews

"Clearly and concisely written, this book provides an excellent introduction to the problem of understanding the empirical statistical properties of prices." Doyne Farmer, Prediction Company, Santa Fe and the Santa Fe Institute

"[A] clear summary of many of the statistical properties of stock prices ... will prove useful to reseachers in several disciplines." /s Journal of Economic Literature

"Mantegna...and Stanley...draw on concepts from statistical physics to describe financial systems...[and]...illustrate the scaling concepts used in probability theory, in critical phenomena, and in fully developed turbulent fluids, and apply them to financial time series to gain insight into the behavior of financial markets." Reference & Research Book News

"This book is beneficial to both the financial economicist and the physicist...An Itroduction to Econopysics Correlations and Complexity in Finance provides a valuable picture of the relationship between physics and financial economics." Discrefe Dynamics in NAture and Society 2001 vol.6

From the Publisher