English
DOI:
https://doi.org/10.63801/rmat.v1i1.8528Keywords:
EnglishAbstract
In this paper, we present a model based on linearly coupled dissipative harmonic oscillators to characterize asset price dynamics, whose fundamental elements are restoring forces, inertia, and damping. The dynamic variables of the physical system are replaced with logarithmic differences between asset prices and reference prices calculated via moving averages. The model is applied to stocks comprising the Brazilian index Ibovespa. The estimated damping coefficients and spring constants suggest attractive and repulsive forces in the market, with a tendency towards regression to the mean and damped joint market movements. The distributions of these parameters indicate significant variations in the degree of interconnection among the stocks, offering valuable insights for asset selection in hedging strategies. Quantities analogous to kinetic and potential energies display power-law-tailed distributions and multifractal behavior, and their dynamics reveal signs of events that have impacted both domestic and international markets.
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