Econophysics: A challenge to econometricians

Christopher A. Zapart

Physica A: Statistical Mechanics and its Applications, 2015, vol. 419, issue C, 318-327

Abstract: The study contrasts mainstream economics–operating on time scales of hours and days–with behavioural finance, econophysics and high-frequency trading, more applicable to short-term time scales of the order of minutes and seconds. We show how the central theoretical assumption underpinning prevailing economic theories is violated on small time scales. We also demonstrate how an alternative behavioural econophysics can model reactions of market participants to short-term movements in foreign exchange markets and, in a direct contradiction of the orthodox economics, design a rudimentary IsingFX automated trading system.

Keywords: Econophysics; Econometrics; Approximate Entropy; Ising spin model; High-frequency trading; Foreign exchange currency markets (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:419:y:2015:i:c:p:318-327

DOI: 10.1016/j.physa.2014.10.013

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