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Spontaneous symmetry breaking of arbitrage

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  • Choi, Jaehyung
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    Abstract

    We introduce the concept of spontaneous symmetry breaking to arbitrage modeling. In the model, the arbitrage strategy is considered as being in the symmetry breaking phase and the phase transition between arbitrage mode and no-arbitrage mode is triggered by a control parameter. We estimate the control parameter for a momentum strategy with real historical data. The momentum strategy aided by symmetry breaking shows stronger performance and has a better risk measure than the naive momentum strategy in U.S. and South Korean markets.

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    File URL: http://www.sciencedirect.com/science/article/pii/S037843711200057X
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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 391 (2012)
    Issue (Month): 11 ()
    Pages: 3206-3218

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    Handle: RePEc:eee:phsmap:v:391:y:2012:i:11:p:3206-3218

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Spontaneous symmetry breaking; Arbitrage modeling; Momentum strategy;

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    Cited by:
    1. Jaehyung Choi & Sungsoo Choi & Wonseok Kang, 2012. "Momentum universe shrinkage effect in price momentum," Papers 1211.6517, arXiv.org.
    2. Jaehyung Choi, 2012. "Physical approach to price momentum and its application to momentum strategy," Papers 1208.2775, arXiv.org, revised Sep 2012.

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