Boltzmann distribution and market temperature

H. Kleinert and X.J. Chen

Physica A: Statistical Mechanics and its Applications, 2007, vol. 383, issue 2, 513-518

Abstract: We show that the minute fluctuations of S&P 500 and NASDAQ 100 indices show Boltzmann statistics over a wide range of positive as well as negative returns, thus allowing us to define a market temperature for either sign. With increasing time the sharp Boltzmann peak broadens into a Gaussian whose volatility σ measured in 1/min is related to the temperature T by T=σ/2. Plots over the years 1990–2006 show that the arrival of the 2000 crash was preceded by an increase in market temperature, suggesting that this increase can be used as a warning signal for crashes.

Date: 2007
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:383:y:2007:i:2:p:513-518

DOI: 10.1016/j.physa.2007.04.101

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