Thursday, July 6, 2017
Tax Prof Jack Manhire (Texas A&M) presents his theory of market mechanics to physicists, economists, and mathematicians today at the 13th Econophysics Colloquium at the University of Warsaw:
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 price displacements in financial markets and finds one can model this dynamic as a harmonic oscillator at local “slices” of elapsed time via a homogeneous coordinate system. Based on this finding, the paper theorizes that price displacements are constrained, meaning they have extreme values beyond which they cannot go for defined periods.
By showing that price displacements might also comply with 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 American, European, and Asian markets 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.