
Stock market forces can be modeled with a quantum harmonic oscillator - alexfarran
https://phys.org/news/2018-02-stock-quantum-harmonic-oscillator.html
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gus_massa
[100% PhD in Math + 50% major in Physics here]

Is this published in a serious journal?

It looks like a lot of technical jargon that doesn't make any sense. The
quantization of the harmonic oscillator is important only for very small
systems. The swing in the park is quantized, but the difference with a
classical oscillator is negligible. Then financial market may be quantized,
but the effect is ultra tiny. And to notice the quantum effects the system
must be almost isolated, so there is no chance to see something like that in
the financial market.

Perhaps there is a chance that the it's only a model that fit the data in
spite there is absolutely no theoretical reason. It's possible, but it's much
easier to overfit the model with the historic data. Do they have any
prediction?

Relevant xkcd: [https://xkcd.com/1240/](https://xkcd.com/1240/)

~~~
alexfarran
The paper is here
[http://rmi.nus.edu.sg/events/pku2017/Program%20Agenda/3.%20M...](http://rmi.nus.edu.sg/events/pku2017/Program%20Agenda/3.%20Modeling%20Stock%20Return%20Distributions%20with%20a%20Quantum%20Harmonic%20Oscillator.pdf)

I don't think it's suggesting that quantum effects play a major role in the
movement of the stock market, just that quantum models can be applied to
finance with different parameters That said, I can't find a clear rationale
for choosing this particular model.

~~~
gus_massa
I think we both agree that it makes no sense to believe that the financial
market is an actual quantum oscillator, and it's somewhat clear in the paper.
But I just suffering because in a few days we will see a horrible press
coverage with the title "Science says financial market is totally quantum".

I try to avoid reading this kind of papers, but I give it a chance. I only
skimmed it, so I'm not sure my takeaway is totally accurate. If you can read
it and make any corrections I'd be happy.

They model the financial market with 3 methods.

* geometric Brownian motion (GBM) that has 2 parameters

* Heston that has 1 parameter

* "Quantum" that in their case has 6 parameters

The quantum method is actually the decomposition of using Hermite polynomials
multiplied by a Gaussian. This is the base that has the solutions of the
quantum oscillator, but they pick the coefficients without any justification.
They probably can use whatever smooth localize base of L2(R) they can find. I
guess they can use some smooth localized wavelets and get almost the same
result (and they can choose one with compact support).

It's possible to use these bases wavelets/HermiteXGaussian/whatever to
decompose any signal, like sound or an image, but there is no relation with a
background process. In particular that HermiteXGaussian is good doesn't prove
that there is a quantum component of the market, only that orthonormal
decomposition is a good mathematical tool.

The main differences between the models in their work is that the first one
has 2 parameters, the second one has 1 parameter and the "quantum" model has 6
parameters. (Why 6? Why not 5 or 7?) It's easy to get a better fit using 6
parameters instead of 2 if your selection of the model is not horrible, and
you can tweak the model a little, and you can pick the time frame, and you
publish only the model that has the best fit. This is totally standard,
nothing shady, but it may give the impression that the selection of the model
has some meaning.

