Turbulence and finance?

Details Turbulence and finance? Turbulence and finance?

1996-09-30

arxiv.org/abs/cond-mat/9609290v1

Physics

Condensed Matter

5 pages (LaTex)+ 6 Postscript figures. To appear in Nature as a Scientific Correspondence

Scientific paper

Analogies between the price dynamics in the foreign exchange market and 3-dimensional fully developed turbulence were recently presented in Nature vol. 381, 767-769 (1996). Independently, we have carried out a study comparing the parallel of the dynamical properties of the S&P 500 index and of the time evolution of a 3-dimensional fully turbulent fluid, but our study arrives at rather different conclusions. Specifically, we find while intermittency -- i.e. abrupt changes of activity in the time evolution of the variance of price changes and of the mean energy dissipation -- and non-Gaussian behavior (for short times) in the probability distribution of price and velocity changes characterize both systems, the stochastic nature of the two processes is quantitatively quite different.

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