The Action Principle in Market Mechanics

J. T Manhire
Additional contact information
J. T Manhire: Texas AM University

No 29c7s, LawRxiv from Center for Open Science

Abstract: This paper explores the possibility that asset prices, especially those traded in large volume on public exchanges, might comply with specific physical laws of motion and probability. The paper first examines the basic dynamics of asset price displacement and finds one can model this dynamic as a harmonic oscillator at local "slices" of elapsed time. Based on this finding, the paper theorizes that price displacements are constrained, meaning they have extreme values beyond which they cannot go when measured over a large number of sequential periods. By assuming price displacements are also subject to the principle of stationary action, the paper explores a method for measuring specific probabilities of future price displacements based on prior historical data. Testing this theory with two prevalent stock indices suggests it can make accurate forecasts as to constraints on extreme price movements during market "crashes" and probabilities of specific price displacements at other times.

Date: 2017-05-26
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://osf.io/download/592854409ad5a10045254c5c/

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:osf:lawarx:29c7s

DOI: 10.31219/osf.io/29c7s

Access Statistics for this paper

More papers in LawRxiv from Center for Open Science
Bibliographic data for series maintained by OSF (contact+lawarxiv@osf.io).