A View from an Economist on Econo-physics

  • Koichi Hamada
Conference paper


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.


Stock Market Stock Price Power Distribution Investment Strategy Representative Agent 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Allais, Maurice, 1972, “The Psychological Rate of Interest,” Journal of Money, Credit and Banking, August 1974, pp. 285–331.Google Scholar
  2. Allais, Maurice, 1988, “Phénomènes Alétoirs et Modèles Fréquentiels —Réalité et Théorie — Prolégomènes pour une Révision des Théories Admises (Random Phenomena and Frequential Models — Reality and Theory — Prolegomena for a Revision of Current Theories),” Lecture of October 5th, 1988. Theinisch-Westtälische. Akademie der Wissenschaften.Google Scholar
  3. Mandelhrot, B. B., 1997, Fractals and Scaling in Finance: Discontinuity, Concentration, Risk, New York, Springer.CrossRefGoogle Scholar
  4. Mandelbrot, B. B., 1999, “A Multifractal Walk down Wall Street,“ Scientific American, v. 280 no. 2 (February 1999), pp. 70–73.Google Scholar
  5. Morris S. and H. S. Shin, 1998, “Unique Equilibrium in a Model ofSelf-Fulfilling Currency Attacks,” American Economic Review, June 1998, Vol. 88 Issue 3, pp. 587–598.Google Scholar
  6. Negishi, T., 1972, General Equilibrium Theory and International Trade, Amsterdam, North-Holland Pub.Co.MATHGoogle Scholar
  7. Samuelson, P. A., 1947, Foundations of Economic Analysis, Cambridge, MA.,Harvard University Press.Google Scholar
  8. Takayasu, H., H. Miura, T. Hirabayashi and K. Hamada (1992), “Statistical Property of Deterministic Threshold Elements: the Case of Market Price.” Physica A, S 2(182), June, pp.127–34.ADSCrossRefGoogle Scholar

Copyright information

© Springer Japan 2004

Authors and Affiliations

  • Koichi Hamada
    • 1
  1. 1.Department of EconomicsYale University, New HavenUSA

Personalised recommendations