Breaking Down the Barriers Between Econophysics and Financial Economics

Download or read book Breaking Down the Barriers Between Econophysics and Financial Economics written by Franck Jovanovic and published by . This book was released on 2018 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article highlights the current misunderstanding between economists and econophysicists by adopting the financial economists' viewpoint in order to explain why the works developed by econophysicists are not recognized in finance. Because both communities do not share the same scientific culture, and for the other reasons developed in the article, economists often consider econophysics as a strictly empirical field without theoretical justification. This paper shows the opposite; it also tries to facilitate the dialogue between econophysicists who often do not explain in details their theoretical roots and financial economists who are not familiar with statistical physics. Beyond this clarification, this paper also allows to identify what remains to be done for econophysicists to contribute significantly to financial economics: 1) development of a common framework vocabulary in order to better compare and integrate the two approaches; 2) development of generative models explaining the emergence of power laws; and 3) development of statistical tests for the identification of such statistical regularities.