Introduction to Econophysics: Correlations and Complexity in Finance

by Rosario N. Mantegna, H. Eugene Stanley

Statistical physics concepts such as stochastic dynamics, short- and long-range correlations, self-similarity and scaling, permit an understanding of the global behavior of economic systems without first having to work out a detailed microscopic description of the system. This pioneering text explores the use of these concepts in the description of financial systems, the dynamic new specialty of econophysics. The authors illustrate the scaling concepts used in probability theory, critical phenomena, and fully-developed turbulent fluids and apply them to financial time series. They also present a new stochastic model that displays several of the statistical properties observed in empirical data. Physicists will find the application of statistical physics concepts to economic systems fascinating. Economists and other financial professionals will benefit from the book's empirical analysis methods and well-formulated theoretical tools that will allow them to describe systems composed of a huge number of interacting subsystems.

Genres: Economics, Finance, Science

162 pages, Hardcover

First published December 1, 1995

Reviews

[Anushri Gupta · Rating 3 out of 5]

I think this book was confused about what it wanted to accomplish. I learned a lot of new concepts like the truncated Levy flight, and the taxonomy of portfolios etc. But the book was so filled with what felt like unnecessary jargon, for phenomena that could have been explained in a more approachable manner. Chapters 10-12 were especially unhelpful.

[Maciej Janiec · Rating 2 out of 5]

It's a pretty good introduction to early studies of financial markets by physicists.

It can serve as an index of econophysics' topics and literature connected with them.