An Evolutionary Quantum Game Model of Financial Market Dynamics - Theory and Evidence
80 Pages Posted: 23 Apr 2007
Date Written: April 23, 2007
The application of mathematical physics to economics has seen a recent development in the form of quantum game theory. Quantum game theory has become an important field of research in multidisciplinary applications of mathematical physics to the study of economic phenomena.
We address the empirical findings of multifractality and turbulence in financial markets' dynamics, from the point of view of evolutionary quantum game theory, proposing a quantum game theoretical model of a financial market, that extends the behavioral framework proposed by Sornette and Zhou for the self-fulfilling Ising model of the markets.
The quantum market model works with a bosonic framework for evolutionary quantum game theory introduced here and is based on recent findings within neuroeconomics and the neurobiology of decision.
The model is tested against actual market data, where it is shown that it is able to reproduce some of the main multifractal signatures present in actual markets.
Keywords: Bosonic Evolutionary Quantum Game Theory, Multifractals, Market Turbulence, Econophysics
JEL Classification: C73, G10, G14, G32, D83, D84, D87
Suggested Citation: Suggested Citation