Practical Fruits of Econophysics : Proceedings of The Third Nikkei Econophysics Symposium

Some economic phenomena are predictable and controllable, and some are impos­ sible to foresee. Existing economic theories do not provide satisfactory answers as to what degree economic phenomena can be predicted and controlled, and in what situations. Against this background, people working on the financial front lines in real life have to rely on empirical rules based on experiments that often lack a solid foundation. "Econophysics" is a new science that analyzes economic phenomena empirically from a physical point of view, and it is being studied mainly to offer scientific, objective and significant answers to such problems. This book is the proceedings of the third Nikkei symposium on ''Practical Fruits of Econophysics," held in Tokyo, November 9-11, 2004. In the first symposium held in 2000, empirical rules were established by analyzing high-frequency finan­ cial data, and various kinds of theoretical approaches were confimied. In the second symposium, in 2002, the predictability of imperfections and of economic fluctua­ tions was discussed in detail, and methods for applying such studies were reported. The third symposium gave an overview of practical developments that can immedi­ ately be applied to the financial sector, or at least provide hints as to how to use the methodology.

1. Market's Basic Properties

Correlated Randomeness: Rare and Not-so-rare Events in Finance

Non-trivial scaling of fluctuations in the trading activity of NYSE

Dynamics and predictability of fluctuations in dollar-yen exchange rates

Temporal characteristics of moving average of foreign exchange markets

Characteristic market behaviors caused by intervention in a foreign exchange market

Apples and Oranges: the difference between the Reaction of the Emerging and Mature Markets to Crashes

Scaling and Memory in Return Loss Intervals: Application to Risk Estimation

Recurrence analysis near the NASDAQ crash of April 2000

Modeling a foreign exchange rate using moving average of Yen-Dollar market data

Systematic tuning of optimal weighted-moving-average of yen-dollar market data

Power law and its transition in the slow convergence to a Gaussian in the S&P500 index

Empirical study of the market impact in the Tokyo Stock Exchange

Econophysics to unravel the hidden dynamics of commodity markets

A characteristic time scale of tick quotes on foreign currency markets

2. Predictability of Markets

Order book dynamics and price impact

Prediction oriented variant of financial log-periodicity and speculating about the stock market development until 2010

Quantitative Forecasting and Modeling Stock Price Fluctuations

Time series of stock price and of two fractal overlaps: Anticipating market crashes ?

Short Time Segment Price Forecasts Using Spline Fit Interactions

Successful Price Cycle Forecasts for S&P Futures Using TF3 - a Pattern Recognition Algorithms Based on the KNN Method

The Hurst's exponent in technical analysis signals

Financial Markets Dynamic Distribution Function, Predictability and Investment Decision-Making (FMDDF)

Market Cycle Turning Point Forecasts by a Two-Parameter Learning Algorithm as a Trading Tool for S&P Futures

3. Mathematical models

The CTRWs in finance: the mean exit time

Discretized Continuous-Time Hierarchical Walks and Flights as possible bases of the non-linear long-term autocorrelations observed in highfrequency financial time-series

Evidence for Superdiffusion and "Momentum" in Stock Price Changes

Beyond the Third Dimension: Searching for the Price Equation

An agent-based model of financial returns in a limit order market

Stock price process and the long-range percolation

What information is hidden in chaotic time series?

Analysis of Evolution of Stock Prices in Terms of Oscillation Theory

Simple stochastic modeling for fat tails in financial markets

Agent Based Simulation Design Principles ? Applications to Stock Market

Heterogeneous agents model for stock market dynamics: role of market leaders and fundamental prices

Dynamics of Interacting Strategies

Emergence of two-phase behavior in markets through interaction and learning in agents with bounded rationality

Explanation of binarized tick data using investor sentiment and genetic learning

A Game-theoretic Stochastic Agents Model for Enterprise Risk Management

4. Correlation and Risk Management

Blackouts, risk, and fat-tailed distributions

Portfolio Selection in a Noisy Environment Using Absolute Deviation as a Risk Measure

Application of PCA and Random Matrix Theory to Passive Fund Management

Testing Methods to Reduce Noise in Financial Correlation Matrices

Application of noise level estimation for portfolio optimization

Method of Analyzing Weather Derivatives Based on Long-range Weather Forecasts

Investment horizons : A time-dependent measure of asset performance

Clustering financial time series

Risk portofolio management under Zipf analysis based strategies

Macro-players in stock markets

Conservative Estimation of Default Rate Correlations

Are Firm Growth Rates Random? Evidence from Japanese Small Firms

Trading Volume and Information Dynamics of Financial Markets

Random Matrix Theory Applied to Portfolio Optimization in Japanese Stock Market

Growth and Fluctuations for Small-Business Firms

5. Networks and Wealth Distributions

The skeleton of the Shareholders Networks

Financial Market - A Network Perspective

Change of ownership networks in Japan

G7 country Gross Domestic Product (GDP) time correlations - A graph network analysis

Dependence of Distribution and Velocity of Money on Required Reserve Ratio

Prospects for Money Transfer Models

Inequalities of Wealth Distribution in a Society with Social Classes

Analyzing money distributions in 'ideal gas' models of markets

Unstable periodic orbits and chaotic transitions among growth patterns of an economy

Power-law behaviors in high income distribution

The power-law exponent and the competition rule of the high income model

6. New Ideas

Personal versus economic freedom

Complexity in an Interacting System of Production

Four Ingredients for New Approaches to Macroeconomic Modeling

Competition phase space: theory and practice

Analysis of Retail Spatial Market System by the Constructive Simulation Method

Quantum-Monadology Approach to Economic Systems

Visualization of microstructures of economic flows and adaptive control