Identifying explosive behavioral trace in the CNX Nifty Index: a quantum finance approach

Abstract

The financial markets are found to be finite Hilbert space, inside which the stocks are displaying their wave-particle duality. The Reynolds number, an age old fluid mechanics theory, has been redefined in investment finance domain to identify possible explosive moments in the stock exchange. CNX Nifty Index, a known index on the National Stock Exchange of India Ltd., has been put to the test under this situation. The Reynolds number (its financial version) has been predicted, as well as connected with plausible behavioral rationale. While predicting, both econometric and machine-learning approaches have been put into use. The primary objective of this paper is to set up an efficient econophysics’ proxy for stock exchange explosion. The secondary objective of the paper is to predict the Reynolds number for the future. Last but not least, this paper aims to trace back the behavioral links as well.

An MFDFA Study to find Herd Behaviour and Information Asymmetry during Demonetization

“…A unique identification of financial Reynolds number has been produced by the authors Ghosh & Kozarevic (2018) which can be strongly used as a proxy for volatility in the market. It can be used as an indicator that tells the investors the right time to exit the market.…”

Predictability and herding of bourse volatility: an econophysics analogue

“…This innovative piece of work is a natural progression from the earlier work (Ghosh & Kozarević, 2018). The work took inspiration from a work where quantum field has been utilized as a financial field; the work used gauge transformation, or simply a change in coordinates (Ilinski, 2001).…”

“…Traders trade within the space of the circuit filters (defining the finite boundaries of the Hilbert space). Their buying and selling behavior are completely probabilistic and, finally, leads to discovery of price (Ghosh & Kozarević, 2018). As this is related to information availability, hence, the direct intervention of information entropy cannot be ruled out either (namely Shannon entropy).…”

“…The previous work (Ghosh & Kozarević, 2018) rationally linked with valid logic and backed up by a strong measuring tool to identify and formulate an apt econophysics proxy (read as financial Reynolds number) for volatility number (explosive number) and further predicting the number for future as well. All the behavioral gaps were identified and validated as per behavioral theories.…”

Econophysical bourse volatility – Global Evidence

“…Coming back to the premise of this very study we find construction and validation of an apt econophysics proxy. Financial Reynolds number has been constructed to find the volatility of stock markets [12]. It originated from theories of fluid mechanics and found itself aptly nestled into the domain of quantitative finance.…”