Market and quantum effect...

Finally I have created the thread "why QM Physics are USELESS in Stock Market modeling" :D
http://www.elitetrader.com/vb/showthread.php?s=&postid=343666#post343666

Quote from harrytrader:


P.S.: If I wanted to discuss QM Physics in stock market the title of the thread would rather be "why QM Physics are USELESS in Stock Market modeling" I mean not more usefull than a toy model like a brownian motion model which serves only as a simplist surrogate for explaining the behavior of market but use only this model for trading then you have to face a martingale process - since brownian model is the typical one mathematically - :D.
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You should remark that we stopped on Thursday at 9512 (super top) more than 2 and even 4 points below the theorical value of 9520 at time unit 10 (see previous first chart): the time cycle is generally 9 and 10 is the beginning of a new cycle; as I said when the real value is well below the theorical point - relatively since it is still below 10 points error - this is often indicative of a breakaway zone (at least on intraday basis). Since we have finished at time cycle 9 and the "time resistance" was cycle 10 we made a very narrow day (explanation of low volatility) on Thursday. Then on Friday we made the big break (expansion of volatility due to upper scale intervention that is weekly scale but I won't detail here but you can guess that I could also predict intraday volatility) and the local top predicted for the week since 01/09 (so 2 days before) was 9667.97 theorically - 2 points from the real super top of the day at of 9666 - see

http://www.elitetrader.com/vb/showthread.php?s=&postid=343675#post343675

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Quote from harrytrader:



Not only the super top of the day was made near the theorical point but in fact all the successive Higher High (HH) were around the theorical points most of them within 2 points except for the 4th HH one where the error is 4 points - which is frequent when the theorical value constitutes later a great break zone.

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Quote from CalTrader:

It is actually amazing what you can do on a small high performance commodity pc - or a small distributed group of these. These have much more computing power than the Crays I worked on in 1980 or the parallel supercomputers of the late 1980's for some problem classes.
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Yes. I remember that the Cray C90 in early 90's had a peak performance of one GFLOPS per processor. I ***GUESS*** a 3.0 GHz Intel CPU probably has better performance. At that time, Intel had a supercomputing division developing a Unix operating system for their parallel computers. It was a nightmare to use it. Of course, a PC can never match a Cray in terms of stability, and security.

Well, time flies. Those are the good old days, when I did not understand the importance of money.

:p :p :p
:D :D :D
 
Quote from harrytrader:

Finally I have created the thread "why QM Physics are USELESS in Stock Market modeling" :D
http://www.elitetrader.com/vb/showthread.php?s=&postid=343666#post343666
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Tell me why it should be useful. It was not invented to explain the workings of the stock market. It cannot even 'explain' gravitation as there is a well known conflict between classical and 'quantum' gravity in that the consistent theory of quantum gravity cannot be constructed using the same quantum rules as for other physical fields. I am not a physicist, just a mathematician, but even I know that.
 
If you ignore it I will quote Michael Young from Reef fund who wrote a paper even before LTCM's debacle - untitled "why diversification doesn't work" - but I don't quote him for that but for his historical perspective in finance research - and who reminds that "there are three major schools of investment: Fundamental, Technical and Quant. Until the early 1970s, the Fundamental and technical schools supplied the ideas and methods that sophisticated investors used to make decisions. But recently, the Quant school has captured the bulk of academic and professional attention." I could also quote famous Hedge Fund Manager Peter Berstein who wrote "the Improbable Origin of Wall Street" who tells the wonderful story of quants but I have the french version only :D. So the quants have predominated the Finance research and telling to them especially to those numerous who come from nuclear research into the field of Finance that physical models cannot be transposed in finance except for being reference models wouldn't please them for sure :D. Now since the debacle of LTCM the quants has lost their supremacy again (note the funny pendulum of financial history) and the fundamental and above all technical schools triumph again : this is illustrated by the last Nobel Prize given to the behavioral school which justifies technical analysts approach as in the past (see for example how Prechter now jubilates by using this Nobel Prize nomination to justify the validity of Elliott theory :D).

As for my model one can either says that it belongs to none of these three schools or that it belongs to all these three since their paragdim opposes with each other whereas my paradigm embraces all of them and add a new emerging one so that I can say that my model is at the same time fundamental, technical and quantitative (I won't extend and only summarize the reasons why : it is fundamental because I dind't use any analogy of Physics as premisces but economic reasoning, it is technical because the results are consistently near what technical analysts obtain but with some adding perspective and precision, and quantitative because it is based on mathematical equations like in "pure" physics model which is not the case of technicals who mostly justify technical analysis with "psychological" fads and so called market's irrationality whereas I reestablish rationality and economical reasons in stock market fundamental dynamics without denying the role of psychology but psychology is no more a cause but an effect in my paradigm).

Quote from electron:



Tell me why it should be useful. It was not invented to explain the workings of the stock market. It cannot even 'explain' gravitation as there is a well known conflict between classical and 'quantum' gravity in that the consistent theory of quantum gravity cannot be constructed using the same quantum rules as for other physical fields. I am not a physicist, just a mathematician, but even I know that.
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As I said in the thread "Is Reality concrete or abstract" http://www.elitetrader.com/vb/showthread.php?s=&postid=344113#post344113 what I have done ressembles what I have done when I have written an essay called UMO Unified Modeling Object where I criticized the uncompletness of UML (Unified Modeling Langage) - in the field of software architecture - and proposed to go a step further. I always try to apply an Unification process which is somehow an economy principle of Lazyness - I unify because I am lazy I want a simple model that will help me to think and build things more easily and surely : this is my goal of using abstraction or modelisation :D

Quote from harrytrader:

As for my model one can either says that it belongs to none of these three schools or that it belongs to all these three since their paragdim opposes with each other whereas my paradigm embraces all of them and add a new emerging one so that I can say that my model is at the same time fundamental, technical and quantitative (I won't extend and only summarize the reasons why : it is fundamental because I dind't use any analogy of Physics as premisces but economic reasoning, it is technical because the results are consistently near what technical analysts obtain but with some adding perspective and precision, and quantitative because it is based on mathematical equations like in "pure" physics model which is not the case of technicals who mostly justify technical analysis with "psychological" fads and so called market's irrationality whereas I reestablish rationality and economical reasons in stock market fundamental dynamics without denying the role of psychology but psychology is no more a cause but an effect in my paradigm).
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Ok I've only read ~ half of this thread and absolutely none of Harrytrader's posts given that he is on my ignore list. Yet what I've seen overcomplicates the relationship between quantum physics and the market - a very important relationship.

I would point everyone in the direction of George Soro's theory of 'Reflexivity' in financial markets:

"I have proposed an alternative explanation based on the two-way connection between fundamentals and valuations, which I call reflexivity." GS

This article is just a start:

http://www.soros.org/news/soros_01_08_01.htm

Everyone can do their own reading on Soro's Reflexivity but what he describes is a Quantum Schrodinger's Cat phenomenon in financial markets. Soro's tries to make Reflexivity his own but what he's really done is cut and paste the law of Schrodinger's Cat and applied it to financial markets. Note he did found the Quantum Fund ...
 
Quote from BlueHorseshoe:

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Everyone can do their own reading on Soro's Reflexivity but what he describes is a Quantum Schrodinger's Cat phenomenon in financial markets. Soro's tries to make Reflexivity his own but what he's really done is cut and paste the law of Schrodinger's Cat and applied it to financial markets. Note he did found the Quantum Fund ...
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I do not know much about Soros reflexivity, but from reading the article, it is not the _spitit_ of the "cat" thought experiment from QM that he is using as a metaphor, but the effects of a recursive feedbacks onto the system, the key idea being that the effect of viewing/trading a system affects the market itself and it's expectations and the effects are symmetric in the direction of time. In a way, the markets are a time machine, where the "conservation" laws are preserving some strange vector or matrix that represents the yields between issues...

nitro
 
Quote from omcate:



Yes. I remember that the Cray C90 in early 90's had a peak performance of one GFLOPS per processor. I ***GUESS*** a 3.0 GHz Intel CPU probably has better performance. At that time, Intel had a supercomputing division developing a Unix operating system for their parallel computers. It was a nightmare to use it. Of course, a PC can never match a Cray in terms of stability, and security.

Well, time flies. Those are the good old days, when I did not understand the importance of money.

:p :p :p
:D :D :D
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Unicos .... If you dealt with that ... Now that was "fun". Serial Vector processing units - or similar pieces of hardware - are still needed for many problem classes since not all problems parallelize.

... Things were fun when I had the time to do research. However things are better today since I control my own financial destiny.

Soros and others have attempted to construct pseudo-science models - behavioural and other - of the markets. They are not based upon direct quantum-physics analogies. Just because someone calls their venture "quantum" does not mean that there is any connection to scientific principle - except maybe in the minds of people who caught the bait and invested into the venture ..... and it does not imply that there is any reproducible priciple underlying their investing ......
 
Quote from nitro:


I do not know much about Soros reflexivity, but from reading the article, it is not the _spitit_ of the "cat" thought experiment from QM that he is using as a metaphor, but the effects of a recursive feedbacks onto the system, the key idea being that the effect of viewing/trading a system affects the market itself and it's expectations and the effects are symmetric in the direction of time. In a way, the markets are a time machine, where the "conservation" laws are preserving some strange vector or matrix that represents the yields between issues...

nitro
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The article on Reflexivity I posted is not really a good descriptor of the theory & thus would caution you not to reach a conclusion (i.e. "I don't know much ... but from reading the article ...") based solely on it. Thus my entreaty to "do your own reading."

In any event, some time ago I did read a bit about Reflexivity and am generally familiar with the concept of wave/particle duality or the Shrodinger's Cat phenomenon in which the act of observation affects that being observed. It struck me as something of a cut-and-paste job on Soro's part. That he named his fund the Quantum Fund made it all too obvious.

For a better online reference take a look at:
http://www.soros.org/textfiles/speeches/042694_Theory_of_Reflexivity.txt
 
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