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A Comment On Two-Phase Behavior Of Financial Markets

Author

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  • ANTHONY E. KRZESINSKI

    (Department of Mathematical Sciences, University of Stellenbosch, Stellenbosch 7600, South Africa)

  • ANDRE COSTA

    (ARC Centre of Excellence for Mathematics and Statistics of Complex Systems, University of Melbourne, Melbourne 3010, Australia)

  • MAYA RAMAKRISHNAN

    (ARC Centre of Excellence for Mathematics and Statistics of Complex Systems, University of Melbourne, Melbourne 3010, Australia)

  • PETER G. TAYLOR

    (ARC Centre of Excellence for Mathematics and Statistics of Complex Systems, University of Melbourne, Melbourne 3010, Australia)

Abstract

A recent study linked the behavior of buying and selling in financial markets to the phenomenon of phase transitions that occur in physical systems with many interacting components. We urge caution with such findings. In particular, we show that the statistical technique employed in the study referred to above to analyze stock trading data also produces evidence of two-phase behavior when used to analyze a simple sequence of independent and identically distributed random variables.

Suggested Citation

  • Anthony E. Krzesinski & Andre Costa & Maya Ramakrishnan & Peter G. Taylor, 2007. "A Comment On Two-Phase Behavior Of Financial Markets," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 89-93.
    • Handle: RePEc:wsi:ijtafx:v:10:y:2007:i:01:n:s0219024907004056
    DOI: 10.1142/S0219024907004056
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    References listed on IDEAS

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    1. Vasiliki Plerou & Parameswaran Gopikrishnan & H. Eugene Stanley, 2003. "Two-phase behaviour of financial markets," Nature, Nature, vol. 421(6919), pages 130-130, January.
    2. Marc Potters & Jean-Philippe Bouchaud, 2003. "Comment on: "Two-phase behaviour of financial markets"," Science & Finance (CFM) working paper archive 50002, Science & Finance, Capital Fund Management.
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    Keywords

    Phase transitions; two-phase behavior;

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