Summary: Computer Physics Communications 146 (2002) 84­92
www.elsevier.com/locate/cpc
Application of computational statistical physics to scale invariance
and universality in economic phenomena $
H.E. Stanley a,
, L.A.N. Amaral a
, P. Gopikrishnan a
, V. Plerou a
, M.A. Salinger b
a Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, USA
b Dept. of Finance and Economics, School of Management, Boston University, Boston, MA 02215, USA
Abstract
This paper discusses some of the similarities between work being done by economists and by computational physicists
seeking to contribute to economics. We also mention some of the differences in the approaches taken and seek to justify these
different approaches by developing the argument that by approaching the same problem from different points of view, new
results might emerge. In particular, we review two such new results. Specifically, we discuss the two newly-discovered scaling
results that appear to be "universal", in the sense that they hold for widely different economies as well as for different time
periods: (i) the fluctuation of price changes of any stock market is characterized by a probability density function (PDF), which
is a simple power law with exponent -4 extending over 102 standard deviations (a factor of 108 on the y-axis); this result is
analogous to the Gutenberg­Richter power law describing the histogram of earthquakes of a given strength; (ii) for a wide range

Source: Amaral, Luis A.N. - Department of Chemical and Biological Engineering, Northwestern University

Collections: Physics; Biology and Medicine