We introduce a model of proportional growth to explain the distribution P(g) of business firm growth rates. The model predicts that P(g) is Laplace in the central part and depicts an asymptotic power - law behavior in the tails with an exponent z = 3. Because of data limitations, previous...

We propose a new measure named the symbolic performance to better understand the structure of foreign exchange markets. Instead of considering currency pairs, we isolate a quantity that describes each currency's position in the market, independent of a base currency. We apply the k-means...

Properly estimating correlations and understanding how they change under different economic conditions plays a key role in asset pricing models, risk management, and many econometric models. In this paper we introduce a robust framework to identify a meaningful correlation relationship, address...

The growth of business firms is an example of a system of complex interacting units that resembles complex interacting systems in nature such as earthquakes. Remarkably, work in econophysics has provided evidence that the statistical properties of the growth of business firms follow the same...

We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We...

Classic studies of the probability density of price fluctuations g for stocks and foreign exchanges of several highly developed economies have been interpreted using a power-law probability density function P(g) ∼ g−( 1) with exponent values 2, which are outside the L´evy-stable regime 0 ...

The hidden nature of causality is a puzzling, yet critical notion for effective decision-making. Financial markets are characterized by fluctuating interdependencies which seldom give rise to emergent phenomena such as bubbles or crashes. In this paper, we propose a method based on symbolic...

The impacts of the Subprime Financial crisis resulted in generally similar decline and volatility in both developed and emerging stock markets. However, in the aftermath of the crisis, the performance of emerging economies was stronger. To investigate this phenomena, this paper seeks to gauge...

The fractional reserve theory of money creation only considers the reserve requirement but ignores prudential regulations. We study the impacts of three prudential regulations under the Basel III framework on the commercial bank's ability to create money. Using a balance sheet approach, we...

In this paper, we introduced a simple money exchange model including agents with minimal intelligence and one representative commercial bank as a showcase for the money creation process in the modern economy. Using this econophysics model with basic behavioral assumptions, we can identify the...