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Nonlinear Dynamics

, Volume 44, Issue 1–4, pp 329–340 | Cite as

Economic Fluctuations and Statistical Physics: The Puzzle of Large Fluctuations

  • H. Eugene Stanley
  • Xavier Gabaix
  • Parameswaran Gopikrishnan
  • Vasiliki Plerou
Article

Abstract

We present an overview of recent research applying ideas of statistical physics to try to better understand puzzles regarding economic fluctuations. One of these puzzles is how to describe outliers, phenomena that lie outside of patterns of statistical regularity. We review evidence consistent with the possibility that such outliers may not exist. This possibility is supported by recent analysis of a database containing the bid, ask, and sale price of each trade of every stock. Further, the data support the picture of economic fluctuations, due to Plerou et al., in which a financial market alternates between being in an “equilibrium phase” where market behavior is split roughly equally between buying and selling, and an “out-of-equilibrium phase” where the market is mainly either buying or selling.

Key Words

Econophysics power-law distributions phase transitions earthquakes 

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Copyright information

© Springer Science + Business Media, Inc. 2006

Authors and Affiliations

  • H. Eugene Stanley
    • 1
  • Xavier Gabaix
    • 1
  • Parameswaran Gopikrishnan
    • 1
  • Vasiliki Plerou
    • 1
  1. 1.Center for Polymer Studies and Department of PhysicsBoston UniversityBostonU.S.A.

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