Econophysics review: I. Empirical facts

Abstract

This article and the companion paper aim at reviewing recent empirical and theoretical developments usually grouped under the term Econophysics. Since the name was coined in 1995 by merging the words 'Economics' and 'Physics', this new interdisciplinary field has grown in various directions: theoretical macroeconomics (wealth distribution), microstructure of financial markets (order book modeling), econometrics of financial bubbles and crashes, etc. We discuss the interactions between Physics, Mathematics, Economics and Finance that led to the emergence of Econophysics. We then present empirical studies revealing the statistical properties of financial time series. We begin the presentation with the widely acknowledged 'stylized facts', which describe the returns of financial assets—fat tails, volatility clustering, autocorrelation, etc.—and recall that some of these properties are directly linked to the way 'time' is taken into account. We continue with the statistical properties observed on order books in financial markets. For the sake of illustrating this review, (nearly) all the stated facts are reproduced using our own high-frequency financial database. Finally, contributions to the study of correlations of assets such as random matrix theory and graph theory are presented. The companion paper will review models in Econophysics from the point of view of agent-based modeling.Computational finance, Correlation, Econophysics, Empirical finance,

Market stability vs. market resilience: Regulatory policies experiments in an agent-based model with low- and high-frequency trading

“…First, in line with the empirical evidence (e.g., Fama, 1970;Pagan, 1996;Chakraborti, Toke, Patriarca, and Abergel, 2011, and references therein), we find that our model generates zero autocorrelation values of price-returns (calculated as logarithmic differences, see Figure 4). In contrast to price returns, the autocorrelation functions of absolute returns display a slow decaying pattern (cf.…”

Ecological Econophysics for Degrowth

“…Ecological economists [1], based on scientific results, generally sustain that the environmental feedback on the economic system is already apparent and could well become dramatic in the near future (they replace the aprioristic belief of τ → ∞ by a set of finite τ , uncertain but scientifically based and, often, small enough to be policy-relevant). The internal equilibrium assumption (τ → 0) has been someway relaxed by several economic schools, but it has been most thoroughly debunked by a recently developed discipline known as econophysics [2][3][4][5]. Econophysics is quickly expanding in the pages of physics journals and consists of the application of concepts and tools of statistical physics to economics.…”

Time-scale effects on the gain-loss asymmetry in stock indices

“…Physicists and economists have been analyzing complex financial time series with forward statistics (see below) for many years [1][2][3]. Inverse statistics has been introduced recently as an alternative way of describing the phenomena of turbulence [4] and adapted to finance by Simonsen et al [5] for analyzing stock market timeseries.…”