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A wave function for Stock Market Returns
journal contribution
posted on 2023-06-08, 09:11 authored by Ali Attaullah, Ian Davidson, Mark TippettThe instantaneous return on the Financial Times-Stock Exchange (FTSE) All Share Index is viewed as a frictionless particle moving in a one-dimensional square well but where there is a non-trivial probability of the particle tunneling into the wells retaining walls. Our analysis demonstrates how the complementarity principle from quantum mechanics applies to stock market prices and of how the wave function presented by it leads to a probability density which exhibits strong compatibility with returns earned on the FTSE All Share Index. In particular, our analysis shows that the probability density for stock market returns is highly leptokurtic with slight (though not significant) negative skewness. Moreover, the moments of the probability density determined under the complementarity principle employed here are all convergent -in contrast to many of the probability density functions on which the received theory of finance is based.
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Publication status
- Published
Journal
Physica A: Statistical Mechanics and its ApplicationsISSN
0378-4371External DOI
Issue
4Volume
388Page range
455-461Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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