Boltzmann Distribution and Temperature of Stock Markets

H. Kleinert and X. J. Chen

Papers from arXiv.org

Abstract: The minute fluctuations of of S&P 500 and NASDAQ 100 indices display Boltzmann statistics over a wide range of positive as well as negative returns, thus allowing us to define a {\em market temperature} for either sign. With increasing time the sharp Boltzmann peak broadens into a Gaussian whose volatility $ \sigma $ measured in $1/ \sqrt{{\rm min}}$ is related to the temperature $T$ by $T= \sigma / \sqrt{2}$. 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. A plot of the Dow Jones temperature over 78 years reveals a remarkable stability through many historical turmoils, interrupted only by short heat bursts near the crashes.

Date: 2006-09, Revised 2007-04
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published in Physica. A 383, 583 (2007)

Downloads: (external link)
http://arxiv.org/pdf/physics/0609209 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:physics/0609209

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().