A COMMENT ON TWO-PHASE BEHAVIOR OF FINANCIAL MARKETS

Anthony E. Krzesinski (), Andre Costa (), Maya Ramakrishnan () and Peter G. Taylor ()
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Anthony E. Krzesinski: Department of Mathematical Sciences, University of Stellenbosch, Stellenbosch 7600, South Africa
Andre Costa: ARC Centre of Excellence for Mathematics and Statistics of Complex Systems, University of Melbourne, Melbourne 3010, Australia
Maya Ramakrishnan: ARC Centre of Excellence for Mathematics and Statistics of Complex Systems, University of Melbourne, Melbourne 3010, Australia
Peter G. Taylor: ARC Centre of Excellence for Mathematics and Statistics of Complex Systems, University of Melbourne, Melbourne 3010, Australia

International Journal of Theoretical and Applied Finance (IJTAF), 2007, vol. 10, issue 01, 89-93

Abstract: A recent study linked the behavior of buying and selling in financial markets to the phenomenon of phase transitions that occur in physical systems with many interacting components. We urge caution with such findings. In particular, we show that the statistical technique employed in the study referred to above to analyze stock trading data also produces evidence of two-phase behavior when used to analyze a simple sequence of independent and identically distributed random variables.

Keywords: Phase transitions; two-phase behavior (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1142/S0219024907004056

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