The Emergence of Econophysics: A New Approach in Modern Financial Theory

Jovanovic, Franck; Schınckus, Chrıstophe

doi:10.1215/00182702-2334758

Cited by 58 publications

(20 citation statements)

References 93 publications

(70 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…We next move to isolate and evaluate the 1 See Mirowski ([1992]) for an historical overview of the relationship between the two disciplines 2 For a popular overview of the 'Physics of Wall Street' see Weatherall ([2013]) 3 As a matter of sociological fact, econophysicists typically publish in physics journals, rather than in economics or finance journals (Gingras and Schinckus [2012]). For more on the history of econophysics, see Jovanovic and Schinckus ([2013a]). For more on econophysics' status as multi-, inter-or trans-disciplinary, see Rosser, Jovanovic andSchinckus ([2010, 2013b]).…”

Section: Econophysics and Its Discontentsmentioning

confidence: 99%

Modelling Inequality

Thébault

Bradley

Reutlinger

2018

The British Journal for the Philosophy of Science

View full text Add to dashboard Cite

Econophysics is a new and exciting cross-disciplinary research field that applies models and modelling techniques from statistical physics to economic systems. It is not, however, without its critics: prominent figures in more mainstream economic theory have criticised some elements of the methodology of econophysics. One of the main lines of criticism concerns the nature of the modelling assumptions and idealisations involved, and a particular target are 'kinetic exchange' approaches used to model the emergence of inequality within the distribution of individual monetary income. This paper will consider such models in detail, and assess the warrant of the criticisms drawing upon the philosophical literature on modelling and idealisation. Our aim is to provide the first steps towards informed mediation of this important and interesting interdisciplinary debate, and our hope is to offer guidance with regard to both the practice of modelling inequality, and the inequality of modelling practice.

show abstract

Section: Econophysics and Its Discontentsmentioning

confidence: 99%

Modelling Inequality

Thébault

Bradley

Reutlinger

2018

The British Journal for the Philosophy of Science

View full text Add to dashboard Cite

show abstract

“…The influence of physics on economics is nothing new (Ingrao & Giorgio, 1990;Le Gall, 2002;Ménard, 1981;Mirowski, 1989b;Schabas, 1990) and finance has also been subject to the influence of physics (Jovanovic, 2006a(Jovanovic, , 2006bJovanovic & Schinckus, 2013, 2016Sornette, 2014). However, despite these links and the variety of physical tools for studying economic/financial phenomena, econophysics is fundamentally a new approach, very different from the previous experiences.…”

Section: Statistical Physics Goes Beyond Its Bordersmentioning

confidence: 99%

“…the correlation function), where r is the distance between two points and ξ(T) is the correlation length -precisely, ξ(T) ∝ |T − Tc| −υ . Then, following the observations of critical phenomena, in order to characterise the divergence observed at the critical point, they added to the 8 See Jovanovic and Schinckus (2013) for further details on the topic. 9 The basic idea of self-organized criticality is that certain phenomena maintain themselves near a critical state.…”

Section: The Theoretical Foundations Of Power Laws In Statistical Phymentioning

confidence: 99%

“…Econophysics is a recent field that dates back to the 1990s; it applies theories\methods developed by physicists and associated with the physics of complex systems in order to study complex (nonlinear) problems in economics (Daniel & Sornette, 2010;Jovanovic & Schinckus, 2013;Săvoiu & Andronache, 2013). Because physics is a science dealing with a great number of natural issues (matter, energy, light etc.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Breaking down the barriers between econophysics and financial economics

Jovanovic

Schınckus

2016

International Review of Financial Analysis

Self Cite

View full text Add to dashboard Cite

This article highlights the current misunderstanding between economists and econophysicists by adopting the financial economists' viewpoint in order to explain why the works developed by econophysicists are not recognized in finance. Because both communities do not share the same scientific culture, and for the other reasons developed in the article, economists often consider econophysics as a strictly empirical field without theoretical justification. This paper shows the opposite; it also tries to facilitate the dialogue between econophysicists who often do not explain in details their theoretical roots and financial economists who are not familiar with statistical physics. Beyond this clarification, this paper also allows to identify what remains to be done for econophysicists to contribute significantly to financial economics: 1) development of a common framework\vocabulary in order to better compare and integrate the two approaches; 2) development of generative models explaining the emergence of power laws; and 3) development of statistical tests for the identification of such statistical regularities.JEL classification: G1, N2, B4, B5, B26

show abstract

“…Unlike in the cases of mechanistic and thermodynamic analogies, methods of statistical mechanics were not introduced to the field by economists, but by physicists themselves (Jovanovic & Schinckus, 2013). Examples of applications are the use of multifractal models in econometrics, or scaling laws in modeling income, wealth, or firm distributions.…”

Section: Analogies From Statistical Mechanicsmentioning

confidence: 99%

The Ecology of Financial Markets

Bouchaud¹,

Bonart

Donier³

et al.

Trades, Quotes and Prices

View full text Add to dashboard Cite

This dissertation is motivated by the 2007-2009 financial crisis and the failure of the mainstream economic methodology to detect the increased fragility of the pre-crisis financial system. I explore the viability of alternative approaches focusing on the methodological blind spots that were revealed by the financial crisis. In particular, I focus on ecological approaches since economics and ecology share many phenomenological similarities but harbor many opposing methodological doctrines, which make them complementary. The collection of projects presented here is my attempt at facilitating crosspollination between the two disciplines dealing with similar problems. The first project considers the connections between ecology and economics, and provides a historical account of how analogical models inspired by different research paradigms led to the development of two contrasting methodological perspectives in economics, the classical physics worldview and the life sciences worldview. I find that the recent financial crisis precipitated a shift in economic methodology towards approaches inspired by life sciences.In the remaining two projects I apply ecological models to finance by combining network approaches with agent-based simulations to study contagion in banking systems. In the first simulation study I explore the impact of uncertainty on the stability of banking networks and show that information asymmetries lead to a striking increase in the risk of system collapse after a financial shock. In the second simulation study I investigate the relationship between concentration and resilience in banking systems. I find, counterintuitively, that an increase in concentration can be beneficial for system stability in certain conditions. Specifically, when concentration is decoupled from inequality, its increase can improve system resilience. Taken together, this thesis shows that ecological approaches can be fruitfully used to illuminate economic problems.

show abstract

The Emergence of Econophysics: A New Approach in Modern Financial Theory

Cited by 58 publications

References 93 publications

Modelling Inequality

Modelling Inequality

Breaking down the barriers between econophysics and financial economics

The Ecology of Financial Markets

Contact Info

Product

Resources

About