Relativistic trading: The speed of light isn't fast enough for some market transactions

The profit made on a stock share bought and sold a moment later might only be a penny or so, but if multiplied by millions of shares over the course of a day the money earned can be big.

Physicsts reveal how to cope with 'frustration'

For most people, frustration is a condition to be avoided. But for scientists studying certain "frustrated" ensembles of interacting components -that is, those which cannot settle into a state that minimizes each interaction-

 it may be the key to understanding a host of puzzling phenomena that affect systems from neural networks and social structures to protein folding and magnetism.

Recurrence Analysis of Stock and Commodity indices

In the contemporary global scenario, the working of the complex and multidimensional factors on the time behaviour of financial series necessitates an investigation of the underlying characteristic features of the same. In addition to the state of the art econometric approaches, analysis in terms of state space dynamics considering the financial time series as deterministic chaos has emerged to be of utmost importance. Understanding the dynamics of a financial series, as a stock market index or a commodity market index is still however, a complex task having its specific requirements.  Market behaviour, in case of both commodity and securities is ultimately reflected by the average trading price movement . Thus the time series representing the indices in the respective markets is a key to understanding the economic similarities/dissimilarities in the two markets.  Our purpose was to analyse the time series representing the indices of commodity and stock markets .

Paul Krugman: Good and Boring ("Right now, Canada is a very important role model")

First, some background. Over the past decade the United States and Canada faced the same global environment. Both were confronted with the same flood of cheap goods and cheap money from Asia. Economists in both countries cheerfully declared that the era of severe recessions was over.
But when things fell apart, the consequences were very different here and there.

In the United States, mortgage defaults soared, some major financial institutions collapsed, and others survived only thanks to huge government bailouts. In Canada, none of that happened. What did the Canadians do differently ?

read more...

EconoPhysics (On offer: laws of nature)

In yesterday's post I asked why economics doesn't have a few laws of nature that could prevent people from basing decisions on the financial equivalent of a perpetual motion machine. Enter the econophysicists, academics, ( usually physicists delving outside the field and not economists borrowing from physics ), who want to apply the rigorous mathematical methods of physics to understanding the economy. By modeling the economy as a collection of minor actors, like the molecules of gas, they hope to uncover how individual actions give rise to the emergent, large-scale phenomena that have sweeping effects—the booms and busts that take us by surprise.

AAAI Fall Symposium - Nov. 5 - 7, 2009 - Arlington, VA

Complex Adaptive Systems and the Threshold Effect: Views from the Natural and Social Sciences

Most interesting phenomena in natural and social systems include constant transitions and oscillations among their various phases. Wars, companies, societies, markets, and humans rarely stay in a stable, predictable state for long. Randomness, power laws, and human behavior ensure that the future is both unknown and challenging. How do events unfold ? When do they take hold ? Why do some initial events cause an avalanche while others do not ? What characterizes these events ? What are the thresholds that differentiate a sea change from a non-event ?

Complex Adaptive Systems have proven to be a powerful tool for exploring these and other related phenomena. We characterize a general CAS model as having a large number of self-similar agents that:

1. utilize one or more levels of feedback;
2. exhibit emergent properties and self-organization; and
3. produce non-linear dynamic behavior.

Advances in modeling and computing technology have led not only to a deeper understanding of complex systems in many areas, but they have also raised the possibility that similar fundamental principles may be at work across these systems, even though the underlying principles may manifest themselves differently.

Econophysicist Predicts Date of Chinese Stock Market Collapse

The Shanghai Composite Index was supposed to burst before July 27 but didn't. A few days after that deadline, however, it dropped by 20 percent. Coincidence ?.

Last month, we looked at a prediction that the Shanghai Composite stock market index was about to crash. The forecast was made by a team lead by the econophysicist Didier Sornette at the Swiss Federal Institute of Technology in Zurich, who has made a study of economic bubbles and how they burst. His thinking is that bubbles are the result of some kind of feedback mechanism that creates faster-than-exponential growth. This kind of growth rate is straightforward to measure, and so bubbles should be easy to identify. In July, he and his buddies pointed out that the Shanghai Composite stock market index was following exactly this kind of trend. But they also made an extraordinary prediction. They said that this bubble would burst between July 17 and 27.

Mark Gimein -> Swan Song: Why Nassim Taleb is Still Wrong

While for just about everyone involved in the markets the last two years of financial history have been a massacre, they have been a long victory lap for Nassim Nicholas Taleb. Taleb is the author of The Black Swan, the book about, as the subtitle puts it, "The Impact of the Highly Improbable." It came out in 2007, just before everything that seemed highly improbable became painfully actual. As everyone else's fortunes have shrunk, Taleb's have risen. Not only have his books made him the public face of the New Catastrophism, but his insights have turned out to be extremely profitable: The Wall Street Journal reports that Universa, a hedge fund for which Taleb serves as guru and adviser, gained more than 100 percent last year and now holds $6 billion.

Ant mega-colony takes over world

A single mega-colony of ants has colonised much of the world, scientists have discovered. Argentine ants living in vast numbers across Europe, the US and Japan belong to the same inter-related colony, and will refuse to fight one another. The colony may be the largest of its type ever known for any insect species, and could rival humans in the scale of its world domination. What's more, people are unwittingly helping the mega-colony stick together. Argentine ants (Linepithema humile) were once native to South America. But people have unintentionally introduced the ants to all continents except Antarctica. These introduced Argentine ants are renowned for forming large colonies, and for becoming a significant pest, attacking native animals and crops.

Mancur Olson (La Lógica de la Acción Colectiva, etc...)

Mancur Olson ( 1932 - 19 de febrero de 1998 ) fue un destacado economista y sociólogo estadounidense que, en el momento de su muerte, trabajaba en el College Park de la Universidad de Maryland. Realizó importantes contribuciones a los estudios de economía política en temas como las funciones de la propiedad privada, los impuestos, los bienes públicos, las acciones colectivas y el desarrollo económico. Olson destacó la base lógica de la participación en los grupos de presión. Las teorías políticas predominantes en su época atribuían un papel primordial a la pertenencia y la participación en los grupos de presión. Unas apelaban a la existencia de un instinto humano por la creación de grupos, otros atribuían el proceso de modernización a la formación de grupos basados en el parentesco. Olson ofreció una explicación radicalmente diferente del fundamento lógico de la acción colectiva organizada. En su primer libro La lógica de la acción colectiva: bienes públicos y la teoría de grupos, propuso que "sólo un incentivo individual y selectivo estimularía a una persona racional de un grupo latente a actuar con un espíritu grupal"; es decir, que sólo un beneficio reservado estrictamente a miembros de un grupo motivaría a alguien a unirse y contribuir al grupo. Esto significa que los individuos actuarán colectivamente para proporcionar bienes privados, no para proporcionar bienes públicos.

How to Avoid Yourself

Every Sunday morning you go for a walk in the city, heading nowhere in particular, with just one rule to your rambling: You never retrace your steps or cross your own path. If you have already walked along a certain block or passed through an intersection, you refuse to set foot there again.

This recipe for tracing a loopless path through a grid of city streets leads into some surprisingly dark back alleys of mathematics—not to mention byways of physics, chemistry, computer science and biology. Avoiding yourself, it turns out, is a hard problem. The exact analysis of self-avoiding walks has stumped mathematicians for half a century; even counting the walks is a challenge.

My own initiation into the trials of self-avoidance came when I began experimenting with a simple model of the folding of protein molecules, a story I told in an earlier "Computing Science" column (see Hayes 1998). Protein folding is close to the historical roots of the self-avoiding walk, which was first conceived as a tool for understanding the geometry of long-chain polymer molecules. A polymer writhing and wriggling in solution forms a random tangle—random, that is, except that no two atoms can occupy the same position at the same time. This "excluded volume effect" in the polymer is modeled by the walk's insistence on avoiding itself.

Fuzzy Math

Have the votes for president been properly counted in Florida ?. On the surface, that's a question of simple math. But beneath the number crunching, Republicans and Democrats are waging a war of disguised biases. When data don't turn out the way your theory predicts, should you question the theory or the data ?. When a new vote tally contradicts an old one, should you distrust the first count or the second ?. When one kind of recount is more evenhanded but another is more comprehensive, which is better ?. These dilemmas form the hidden crux of the debate over whether to recount Florida's ballots by hand, as Democrats prefer, or to rely on a machine recount, as Republicans prefer. The two parties aren't being candid about these questions. And math won't answer them.

Guilt by Calculation

This kind of statistical gumshoeing has a long history. In 1936, for example, English biologist and statistician R. A. Fisher went gunning for Gregor Mendel, whose experimental results Fisher believed had been tweaked to be more favorable to Mendel's ideas. "Fictitious data can seldom survive a careful scrutiny," Fisher wrote, "and, since most men underestimate the frequency of large deviations arising by chance, such data may be expected generally to agree more closely with expectation than genuine data would." In other words, it was precisely the beautiful agreement of experiment with theory that exposed Mendel's thumb on the scale. Only once in 15,000 times, Fisher computed, could one expect such strong conformity. ( The controversy over Mendel's research practices continues to this day, with notable scientists lining up on both men's sides ).

Dambisa Moyo

Dambisa Moyo was born and raised in Zambia, Southern Africa. She completed a PhD in Economics at Oxford University and holds a Masters from Harvard University. She completed a Bachelors degree in Chemistry and MBA in Finance at the American University in Washington D.C...

...This book ( How the West Was Lost, scheduled for publication with Penguin and Farrar, Straus & Giroux in 2010 ) examines the policy errors made in the US and other Western economies which culminated in the 2008 financial crisis. And discusses why financial and economic experts missed the signs of the credit crunch. It also explores the policy decisions that have placed the emerging world- China, Russia and the Middle East, in pole position to become the dominant economic players in the 21st century.

Palabras del Presidente de la República de Costa Rica Óscar Arias en la Cumbre de las Américas ( 18 de abril del 2009 )

Trinidad y Tobago: 18 de abril del 2009

Tengo la impresión de que cada vez que los países caribeños y latinoamericanos se reúnen con el presidente de los Estados Unidos de América, es para pedirle cosas o para reclamarle cosas. Casi siempre, es para culpar a Estados Unidos de nuestros males pasados, presentes y futuros. No creo que eso sea del todo justo.

No podemos olvidar que América Latina tuvo universidades antes de que Estados Unidos creara Harvard y William & Mary, que son las primeras universidades de ese país. No podemos olvidar que en este continente, como en el mundo entero, por lo menos hasta 1750 todos los americanos eran más o menos iguales: todos eran pobres.

Cuando aparece la Revolución Industrial en Inglaterra, otros países se montan en ese vagón: Alemania, Francia, Estados Unidos, Canadá, Australia, Nueva Zelanda… y así la Revolución Industrial pasó por América Latina como un cometa, y no nos dimos cuenta. Ciertamente perdimos la oportunidad.

También hay una diferencia muy grande. Leyendo la historia de América Latina, comparada con la historia de Estados Unidos, uno comprende que Latinoamérica no tuvo un John Winthrop español, ni portugués, que viniera con la Biblia en su mano dispuesto a construir una Ciudad sobre una Colina, una ciudad que brillara, como fue la pretensión de los peregrinos que llegaron a Estados Unidos.

Hace 50 años, México era más rico que Portugal. En 1950, un país como Brasil tenía un ingreso per cápita más elevado que el de Corea del Sur. Hace 60 años, Honduras tenía más riqueza per cápita que Singapur, y hoy Singapur –en cuestión de 35 ó 40 años– es un país con $40.000 de ingreso anual por habitante. Bueno, algo hicimos mal los latinoamericanos.

¿ Qué hicimos mal ?. No puedo enumerar todas las cosas que hemos hecho mal. Para comenzar, tenemos una escolaridad de 7 años. Esa es la escolaridad promedio de América Latina y no es el caso de la mayoría de los países asiáticos. Ciertamente no es el caso de países como Estados Unidos y Canadá, con la mejor educación del mundo, similar a la de los europeos. De cada 10 estudiantes que ingresan a la secundaria en América Latina, en algunos países solo uno termina esa secundaria. Hay países que tienen una mortalidad infantil de 50 niños por cada mil, cuando el promedio en los países asiáticos más avanzados es de 8, 9 ó 10.

Nosotros tenemos países donde la carga tributaria es del 12% del producto interno bruto, y no es responsabilidad de nadie, excepto la nuestra, que no le cobremos dinero a la gente más rica de nuestros países. Nadie tiene la culpa de eso, excepto nosotros mismos. En 1950, cada ciudadano norteamericano era cuatro veces más rico que un ciudadano latinoamericano. Hoy en día, un ciudadano norteamericano es 10, 15 ó 20 veces más rico que un latinoamericano. Eso no es culpa de Estados Unidos, es culpa nuestra.

En mi intervención de esta mañana, me referí a un hecho que para mí es grotesco, y que lo único que demuestra es que el sistema de valores del siglo XX, que parece ser el que estamos poniendo en práctica también en el siglo XXI, es un sistema de valores equivocado. Porque no puede ser que el mundo rico dedique 100.000 millones de dólares para aliviar la pobreza del 80% de la población del mundo –en un planeta que tiene 2.500 millones de seres humanos con un ingreso de $2 por día– y que gaste 13 veces más ( $1.300.000.000.000 ) en armas y soldados.

Como lo dije esta mañana, no puede ser que América Latina se gaste $50.000 millones en armas y soldados. Yo me pregunto: ¿ Quién es el enemigo nuestro ?. El enemigo nuestro, presidente Correa, de esa desigualdad que usted apunta con mucha razón, es la falta de educación; es el analfabetismo; es que no gastamos en la salud de nuestro pueblo; que no creamos la infraestructura necesaria, los caminos, las carreteras, los puertos, los aeropuertos; que no estamos dedicando los recursos necesarios para detener la degradación del medio ambiente; es la desigualdad que tenemos, que realmente nos avergüenza; es producto, entre muchas cosas, por supuesto, de que no estamos educando a nuestros hijos y a nuestras hijas.

Uno va a una universidad latinoamericana y todavía parece que estamos en los sesenta, setenta u ochenta.

Parece que se nos olvidó que el 9 de noviembre de 1989 pasó algo muy importante, al caer el Muro de Berlín, y que el mundo cambió. Tenemos que aceptar que este es un mundo distinto, y en eso francamente pienso que todos los académicos, que toda la gente de pensamiento, que todos los economistas, que todos los historiadores, casi que coinciden en que el siglo XXI es el siglo de los asiáticos, no de los latinoamericanos. Y yo, lamentablemente, coincido con ellos. Porque mientras nosotros seguimos discutiendo sobre ideologías, seguimos discutiendo sobre todos los ismos ¿ cuál es el mejor ? capitalismo, socialismo, comunismo, liberalismo, neoliberalismo, socialcristianismo...), los asiáticos encontraron un “ismo” muy realista para el siglo XXI y el final del siglo XX, que es el pragmatismo.

Para solo citar un ejemplo, recordemos que cuando Deng Xiaoping visitó Singapur y Corea del Sur, después de haberse dado cuenta de que sus propios vecinos se estaban enriqueciendo de una manera muy acelerada, regresó a Pekín y dijo a los viejos camaradas maoístas que lo habían acompañado en la Larga Marcha: Bueno, la verdad, queridos camaradas, es que mí no me importa si el gato es blanco o negro, lo único que me interesa es que cace ratones. Y si hubiera estado vivo Mao, se hubiera muerto de nuevo cuando dijo que “ la verdad es que enriquecerse es glorioso ”. Y mientras los chinos hacen esto, y desde el 79 a hoy crecen a un 11%, 12% o 13%, y han sacado a 300 millones de habitantes de la pobreza, nosotros seguimos discutiendo sobre ideologías que tuvimos que haber enterrado hace mucho tiempo atrás.

La buena noticia es que esto lo logró Deng Xioping cuando tenía 74 años. Viendo alrededor, queridos Presidentes, no veo a nadie que esté cerca de los 74 años. Por eso solo les pido que no esperemos a cumplirlos para hacer los cambios que tenemos que hacer.

Muchas gracias.

ARI FLEISCHER: Everyone Should Pay Income Taxes

In addition to exempting almost 50% of the country from income taxes, today nearly every other social cause is given a loophole -- or a preference -- in the tax code. Want to buy a hybrid vehicle? You get a tax break. Do you own a solar water heater? You get a credit. Want to give to charity? You get a deduction. Own a house? There's another tax deduction for you. How about college savings, certain medical costs, and retirement savings? Yes, yes, and of course yes. Did you move, pay alimony, or "provide housing to a Midwestern displaced individual"? More deductions, credits and exemptions there too, if you qualify.

A very small number of taxpayers -- the 10% of the country that makes more than $92,400 a year -- pay 72.4% of the nation's income taxes.

Physicists: They Tried to Outsmart Wall Street

Emanuel Derman expected to feel a letdown when he left particle physics for a job on Wall Street in 1985. After all, for almost 20 years, as a graduate student at Columbia and a postdoctoral fellow at institutions like Oxford and the University of Colorado, he had been a spear carrier in the quest to unify the forces of nature and establish the elusive and Einsteinian “theory of everything,” hobnobbing with Nobel laureates and other distinguished thinkers. How could managing money compare?

Dr. Derman, who likes to say it is the models that are simple, not the world, maintains they can be a useful guide to thinking as long as you do not confuse them with real science — an approach Dr. Taleb scorned as “schizophrenic.”
 
Dr. Derman said, “Nobody ever took these models as playing chess with God.”
 
Do some people take the models too seriously? “Not the smart people,” he said.

Why Skilled Immigrants Are Leaving the U.S. ?

As the debate over H-1B workers and skilled immigrants intensifies, we are losing sight of one important fact: The U.S. is no longer the only land of opportunity. If we don't want the immigrants who have fueled our innovation and economic growth, they now have options elsewhere. Immigrants are returning home in greater numbers. And new research shows they are returning to enjoy a better quality of life, better career prospects, and the comfort of being close to family and friends.

Quantum Darwinism ( by Wojciech Hubert Zurek )

Quantum Darwinism describes the proliferation, in the environment, of multiple records of selected states of a quantum system. It explains how the quantum fragility of a state of a single quantum system can lead to the classical robustness of states in their correlated multitude; shows how effective 'wave-packet collapse' arises as a result of the proliferation throughout the environment of imprints of the state of the system; and provides a framework for the derivation of Born's rule, which relates the probabilities of detecting states to their amplitudes. Taken together, these three advances mark considerable progress towards settling the quantum measurement problem.

Darwin and Physics ?

Darwin and physics ?: The relevance of Darwin's ideas in physics, the wider context of Darwin's legacy and the controversy that rumbles on are explored in a special collection of articles marking the anniversary of the theory of evolution.

It is not obviously the business of a physics journal to mark the anniversary of a major development in biology. But the repercussions of Darwin's theory of evolution are relevant to all.