Presented By: U-M Industrial & Operations Engineering
IOE Lunch & Learn Seminar Series: Abdullah Alshelahi
Physics of Stock Markets
Open to all IOE graduate students and faculty. Lunch will be provided. In order to get an accurate count for food, please RSVP by noon on Wednesday, January 23.
Abstract:
Stock markets play a vital role in the stability of the global economy. The financial crash in 2008 is a vivid example of how the stock markets and economy are connected. The underlying structure of stock markets is complex. Complex systems tend to operate in a nonlinear fashion, generating extreme and rare events. Current research in stock markets mainly focuses on analyzing individual stocks (i.e. microscopic analysis) while ignoring the overall interactions and dynamics between them (i.e. macroscopic analysis). In this talk, I will present a new perspective on the macroscopic nature of stock markets. This perspective offers new insights into the physics of the markets. The proposed approach analyzes the markets within the context of fluid dynamics. We utilize, for the first time, concepts from physics and incorporate them in modeling the external and internal dynamics of the markets. A novel model consisting of a stochastic system of nonlinear partial differential equations is introduced. The model allows connecting and determining the evolution of macroscopic variables adaptively. In the last part of this talk, I will address several extensions and ongoing efforts in this research.
Abstract:
Stock markets play a vital role in the stability of the global economy. The financial crash in 2008 is a vivid example of how the stock markets and economy are connected. The underlying structure of stock markets is complex. Complex systems tend to operate in a nonlinear fashion, generating extreme and rare events. Current research in stock markets mainly focuses on analyzing individual stocks (i.e. microscopic analysis) while ignoring the overall interactions and dynamics between them (i.e. macroscopic analysis). In this talk, I will present a new perspective on the macroscopic nature of stock markets. This perspective offers new insights into the physics of the markets. The proposed approach analyzes the markets within the context of fluid dynamics. We utilize, for the first time, concepts from physics and incorporate them in modeling the external and internal dynamics of the markets. A novel model consisting of a stochastic system of nonlinear partial differential equations is introduced. The model allows connecting and determining the evolution of macroscopic variables adaptively. In the last part of this talk, I will address several extensions and ongoing efforts in this research.
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