Econophysics and market statistics
What happens when the tools of statistical physics are pointed at financial data. These guides cover fat tails and power laws, the research that documented them, the models that treat crashes as phase transitions, and the criticism the field has drawn from economists.
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Econophysics for beginners: what happens when physicists study the stock market
Random walks, fat tails and power laws explained with coin flips, and what they change about how risk is measured.
461 vs 79
Dow days beyond three standard deviations in 107 years, against what a bell curve predicts
22.6%
fall in the Dow on 19 October 1987, about 21 standard deviations
Random walk theory: the math, the history and the tests that challenged it
Bachelier to Malkiel, the square-root rule, 10,000 simulated price paths, the variance ratio test that rejected the random walk, and where momentum and fat tails fit.
Fat tails in finance: how often markets break the bell curve
Five-sigma days on the S&P 500 since 1928 against the normal distribution, kurtosis, the inverse cubic law, extreme value theory and what fat tails did to VaR, LTCM and option prices.
Econophysics: how physics explains financial markets
The tools statistical physics lends to finance, the findings they produced on fat tails and crashes, and the criticism economists raise.