On the 'Usual' Misunderstandings between Econophysics and Finance: Some Clarifications on Modelling Approaches and Efficient Market Hypothesis

21 Pages Posted: 19 Dec 2018

See all articles by Marcel Ausloos

Marcel Ausloos

University of Leicester - School of Management

Franck Jovanovic

TELUQ University

Christophe Schinckus

University of Leicester

Date Written: December 2, 2018

Abstract

In line with the recent research and debates about econophysics and financial economics, this article discusses on usual misunderstandings between the two disciplines in terms of modelling and basic hypotheses. In the literature devoted to econophysics, the methodology used by financial economists is frequently considered as a top-down approach (starting from a priori “first principles”) while econophysicists rather present themselves as scholars working with a (empirical data prone) bottom-up approach. Although this dualist perspective is very common in the econophysics literature, this paper claims that the distinction is very confusing and does not permit to reveal the essence of the differences between finance and econophysics. The distinction between these two fields is mainly investigated here through the lens of the Efficient Market Hypothesis in order to show that, in substance, econophysics and financial economics tend to have a similar approach implying that the misunderstanding between these two fields at the modelling level can therefore be overstepped.

Keywords: Financial economics and econophysics; Statistical physics applied to finance; Efficient market hypothesis; Interdisciplinarity; Econophysics

JEL Classification: G1, B4, B5

Suggested Citation

Ausloos, Marcel and Jovanovic, Franck and Schinckus, Christophe, On the 'Usual' Misunderstandings between Econophysics and Finance: Some Clarifications on Modelling Approaches and Efficient Market Hypothesis (December 2, 2018). Available at SSRN: https://ssrn.com/abstract=3294551 or http://dx.doi.org/10.2139/ssrn.3294551

Marcel Ausloos

University of Leicester - School of Management ( email )

Leicester
Leicester, AK LE1 4AY
United Kingdom

Franck Jovanovic (Contact Author)

TELUQ University ( email )

5800 St Denis
Montreal, QC H2S 3L4
Canada

HOME PAGE: http://https://www.teluq.ca/siteweb/univ/fjovanov.html

Christophe Schinckus

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

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