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
