An Evolutionary Quantum Game Model of Financial Market Dynamics - Theory and Evidence
80 Pages Posted: 23 Apr 2007
Date Written: April 23, 2007
Abstract
The application of mathematical physics to economics has seen a recent development in the form of quantum game theory. Quantum game theory has become an important field of research in multidisciplinary applications of mathematical physics to the study of economic phenomena.
We address the empirical findings of multifractality and turbulence in financial markets' dynamics, from the point of view of evolutionary quantum game theory, proposing a quantum game theoretical model of a financial market, that extends the behavioral framework proposed by Sornette and Zhou for the self-fulfilling Ising model of the markets.
The quantum market model works with a bosonic framework for evolutionary quantum game theory introduced here and is based on recent findings within neuroeconomics and the neurobiology of decision.
The model is tested against actual market data, where it is shown that it is able to reproduce some of the main multifractal signatures present in actual markets.
Keywords: Bosonic Evolutionary Quantum Game Theory, Multifractals, Market Turbulence, Econophysics
JEL Classification: C73, G10, G14, G32, D83, D84, D87
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Large Stock Market Price Drawdowns are Outliers
By Anders Johansen and Didier Sornette
-
Significance of Log-Periodic Precursors to Financial Crashes
By Anders Johansen and Didier Sornette
-
On Rational Bubbles and Fat Tails
By Thomas Lux and Didier Sornette
-
Endogenous Versus Exogenous Crashes in Financial Markets
By Anders Johansen and Didier Sornette
-
By Anders Johansen and Didier Sornette
-
2000-2003 Real Estate Bubble in the UK But Not in the USA
By Wei-xing Zhou and Didier Sornette
-
Financial Bubbles, Real Estate Bubbles, Derivative Bubbles, and the Financial and Economic Crisis
By Didier Sornette and Ryan Woodard
-
Financial Bubbles, Real Estate Bubbles, Derivative Bubbles, and the Financial and Economic Crisis
By Didier Sornette and Ryan Woodard
-
Empirical Distributions of Log-Returns: Between the Stretched Exponential and the Power Law?
By Yannick Malevergne, Vladilen Pisarenko, ...