Quantum Model Uses Physics to Explain Stock Market Oddities
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A new quantum mechanics model explains stock market anomalies like fat tails and volatility clustering by incorporating economic uncertainty and herding behavior.
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The model uses concepts like diffusion and potential energy from quantum mechanics to simulate stock return distributions.
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The simulated power law distribution shows extreme events like crashes are more likely than a normal distribution predicts.
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The model matches real stock market data and shows increased uncertainty causes stronger herding behavior and fatter tails.
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The quantum mechanics approach could inspire more physics-finance interdisciplinary research to uncover hidden financial market patterns.