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On the "usual" misunderstandings between econophysics and finance: Some clarifications on modelling approaches and efficient market hypothesis

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journal contribution
posted on 16.11.2016, 16:37 by Marcel Ausloos, Franck Jovanovic, Christophe Schinckus
In line with the recent research and debates about econophysics and financial economics, this article discusses on usual misunderstandings between the two disciplines in terms of modelling and basic hypotheses. In the literature devoted to econophysics, the methodology used by financial economists is frequently considered as a top-down approach (starting from a priori "first principles") while econophysicists rather present themselves as scholars working with a (empirical data prone) bottom-up approach. Although this dualist perspective is very common in the econophysics literature, this paper claims that the distinction is very confusing and does not permit to reveal the essence of the differences between finance and econophysics. The distinction between these two fields is mainly investigated here through the lens of the Efficient Market Hypothesis in order to show that, in substance, econophysics and financial economics tend to have a similar approach implying that the misunderstanding between these two fields at the modelling level can therefore be overstepped.

History

Citation

International Review of Financial Analysis, 2016, 47, pp. 7-14

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Management

Version

AM (Accepted Manuscript)

Published in

International Review of Financial Analysis

Publisher

Elsevier

issn

1057-5219

Acceptance date

25/05/2016

Available date

04/12/2017

Publisher version

http://www.sciencedirect.com/science/article/pii/S1057521916300849

Notes

JEL classification: G1, B4, B5

Language

en