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Reassessment of the Concept of Momentum in Econophysics

Author

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  • Mario J. Pinheiro
  • Mario Rodrigo Afonso Pinheiro

Abstract

We examine the most basic feature of the economic process - momentum - under the point of view of analogies with physical laws, as they were reformulated recently [1]. Our approach is applied with minimal assumptions and we conclude that the inclusion of entropy as an effective variable in econophysics may bring a new vision of economic progress and the possibility to harness economic waves as a means to transport development from rich to poor countries using trade and technological progress. A new technical indicator for the stock market is proposed offering double opportunities on enter and exit trades, when compared to the Relative Strength Index usually used in analysis of financial markets.

Suggested Citation

  • Mario J. Pinheiro & Mario Rodrigo Afonso Pinheiro, 2021. "Reassessment of the Concept of Momentum in Econophysics," European Journal of Applied Physics, European Open Science, vol. 3(6), pages 25-35, November.
    • Handle: RePEc:epw:physic:v:3:y:2021:i:6:id:11126
    DOI: 10.24018/ejphysics.2021.3.6.126
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    References listed on IDEAS

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    1. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    2. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    3. Vladimir Soloviev & Vladimir Saptsin, 2011. "Heisenberg uncertainty principle and economic analogues of basic physical quantities," Papers 1111.5289, arXiv.org.
    4. Gori, F. & Ludovisi, D. & Cerritelli, P.F., 2007. "Forecast of oil price and consumption in the short term under three scenarios: Parabolic, linear and chaotic behaviour," Energy, Elsevier, vol. 32(7), pages 1291-1296.
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