Chapter

Statistical Physics and Economic Fluctuations

H. Eugene Stanley, Xavier Gabaix, Parameswaran Gopikrishnan and Vasiliki Plerou

in The Economy as an Evolving Complex System, III

Published in print October 2005 | ISBN: 9780195162592
Published online October 2011 | e-ISBN: 9780199850495 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780195162592.003.0005

Series: Santa Fe Institute Studies on the Sciences of Complexity

Statistical Physics and Economic Fluctuations

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To try to understand better puzzles regarding economic fluctuations, this chapter presents an overview of collaborative research between economists and physicists, which is focused on applying ideas of statistical physics. Describing outliers is one of the inquiries conducted to determine its existence. Outliers are phenomena that lie outside of patterns of statistical regularity. Evidence consistent with the possibility that such outliers may not exist is reviewed. This possibility is supported by the extensive numerical analysis of a huge database, containing every trade, which results in power-law descriptions of a number of quantities whose fluctuations are of interest. It is also supported by recent analysis of Plerou et al. of a database containing the bid, the ask, and the sale price of each trade of every stock. Further, the Plerou et al. analysis is consistent with a possible theoretical framework for understanding economic fluctuations.

Keywords: economic fluctuations; economists; physicists; outliers; Plerou

Chapter.  14793 words.  Illustrated.

Subjects: Economic Systems

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