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Quantum Temporal Winds: Turbulence in Financial Markets
Version 1
: Received: 4 March 2024 / Approved: 5 March 2024 / Online: 5 March 2024 (15:07:55 CET)
A peer-reviewed article of this Preprint also exists.
Zheng, H.; Dong, B. Quantum Temporal Winds: Turbulence in Financial Markets. Mathematics 2024, 12, 1416. Zheng, H.; Dong, B. Quantum Temporal Winds: Turbulence in Financial Markets. Mathematics 2024, 12, 1416.
Abstract
This paper draws upon the theory of turbulence in physics to explore the similarities and differences between volatility in financial markets and turbulent phenomena at a statistical physics level. By analogizing the dynamics of financial markets with fluid turbulence, we have developed an innovative analytical framework aimed at deepening the understanding of the complexity inherent in financial markets.
Our research methodology includes a comparative analysis of simulated time series data for the Standard & Poor's 500 Index and fully developed turbulent velocity time series. We focus on the similarities in key statistical physical properties, including probability distributions, correlation structures, and power spectral densities. Furthermore, we have established a model of capital flow in financial markets and proposed corresponding solutions. Through computational simulations and data analysis, we find that while financial market volatility shares some statistical characteristics with turbulent phenomena, significant differences exist in the shapes of probability distributions and the temporal scales of correlations. This suggests that although financial markets exhibit patterns akin to turbulence, the behavior of this complex, multi-variable driven system does not completely correspond to natural turbulence, highlighting the limitations of directly applying turbulence theory to financial market analysis. Our study offers a new perspective for the theories of financial markets and the field of econophysics, providing fresh insights into the complexity of financial markets and contributing to the prevention and management of financial risk.
Keywords
quantum finance; financial markets; turbulence; time series analysis
Subject
Physical Sciences, Other
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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