Stock market forces can be modeled with a quantum harmonic oscillator

Traditionally, a quantum harmonic oscillator model is used to describe the tiny vibrations in a diatomic molecule, but the description is also universal in the sense that it can be extended to a variety of other situations in physics and beyond. One example of this is illustrated in a new study, in which researchers show that the restoring force in a vibrating quantum harmonic oscillator provides a good approximation of the market force that restores a fluctuating stock return to equilibrium.

The researchers, K. Ahn and coauthors, have published a paper on their application of a quantum harmonic oscillator to the dynamics of stock returns in a recent issue of EPL.

"We improve modeling of stock return distributions by proposing a quantum harmonic oscillator as a model for the market force which draws stock returns from short-run fluctuations to the long-run equilibrium," coauthor Moo Young Choi at Seoul National University told Phys.org. "The well-developed quantum method provides us both an analytical solution to the stock return distribution and insight into the essentials of stock return behaviors."