A View from an Economist on Econo-physics
Economists have learned much from physicists since the earlier days of economics. Mathematical optimization of the satisfaction of consumers is the key concept where economics find the analogy from the method of physics. It is highly welcomed that economists are now under the new stimulus from new concepts in physics such as fractals and the power distribution.
I will present some views from economists in the study of stock-price determination, a topic I worked a little with Dr. Hideki Takayasu. The advantage of econo-physics is that it can apply the idea of statistical mechanics in which each particle moves differently hut the total substance can exhibit certain regularities. On the other hand, physicists may learn from economists’ recognition that one has to specify precisely the information content each agent obtains. Also it will be useful to note that one has to take into account that the economic universe is closed and required to satisfy certain consistency conditions.
We first estimate the average growth of a company’s annual income and its variance by using both real company data and a numerical model which we already introduced a couple of years ago. Investment strategies expecting for income growth is evaluated based on the numerical model. Our numerical simulation suggests the possibility that an investment strategy focusing on the medium-sized companies gives the best asset growth with relatively low risk.
KeywordsStock Market Stock Price Power Distribution Investment Strategy Representative Agent
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