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A Critical Review of the Main Approaches on Financial Market Dynamics Modelling

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  • Pasca Lucian

    (PhD Student, West University of Timisoara, Faculty of Economics and Business Administration, Blvd. Pestalozzi 16, Timisoara 300115, Romania)

Abstract

While the interpretation of the EMH has changed over the last 50 years, its meaningfulness continues to define our view on how financial markets work. Competing approaches such as BFT and ACT have been proven to be in particular cases of an infinite spectrum of market states; all come under the framework of the AMH. The flexible framework of the AMH enables a trans-disciplinary approach for the study of financial system dynamics. An evolutionary and contextual view on financial systems allows researchers to use techniques and instruments from quantum mechanics and statistical physics to quantify volatility and provide an interpretation to the cognitive processes underlying investor decision making. Such a context also enables to tackle the interpretation of information processing at a cognitive level through consideration of quantum effects in the price formation mechanism.

Suggested Citation

  • Pasca Lucian, 2015. "A Critical Review of the Main Approaches on Financial Market Dynamics Modelling," Journal of Heterodox Economics, Sciendo, vol. 2(2), pages 151-167, December.
    • Handle: RePEc:vrs:joheec:v:2:y:2015:i:2:p:151-167:n:4
    DOI: 10.1515/jheec-2015-0017
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    More about this item

    Keywords

    efficient markets hypothesis; behavioral finance theory; algorithm complexity theory; adaptive markets hypothesis; econophysics;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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