Insights into the macroscopic behavior of equity markets: Theory and application

Abdullah AlShelahi and Romesh Saigal

Physica A: Statistical Mechanics and its Applications, 2018, vol. 505, issue C, 778-793

Abstract: In this research, we propose a macroscopic model of the equity market based on the physics of fluid dynamics. We develop sensors triggered by certain properties of the macroscopic variables, density and velocity, that can alert regulators to abnormal activity. Fluid flow in physics will be used to measure the irregularities found in the behavior of financial markets. Testing the proposed sensors on the day of a flash crash suggests further investigation in this area.

Keywords: Financial markets; Macroscopic model; Stochastic partial differential equations; Flash crash (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:505:y:2018:i:c:p:778-793

DOI: 10.1016/j.physa.2018.03.074

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