Australian Institute of Physics

South Australian Branch

AIP/NITP/CSSM Joint lecture

Joint lecture with the

Special Research Centre for the Subatomic Structure of Matter
and the National Institute for Theoretical Physics.

Thursday, March 6th, 2003, at 7:30pm
Kerr Grant Lecture Theatre ,
Physics Building, University of Adelaide

All welcome

"Complex Systems: From Subatomic Physics to Financial Markets"

by Professor Josef Speth
(Inst. of Nuclear Physics, FZ-Jülich, and Helmholtz Institute, University of Bonn)

Complexity is an interdisciplinary concept addressing questions such as the emergence of order from randomness. Based on two natural complex systems, strongly interacting subatomic many-body systems and financial markets, we present arguments in favour of the statement that complexity is a phenomenon on the border between collectivity and chaos. In subatomic physics, this is shown for the decay of "giant resonances" in nuclei, where collective nuclear states stand out in otherwise chaotic spectra. Like nuclei, stock and bond indices, such as the DOW, S&P or DAX (Deutscher Aktien indeX) have a finite number of constituents, and thus can be subject to similar mathematical methods and questions such as world stock market cross-correlations (eg DAX vs Dow Jones) and quantification of the dynamics of financial correlations can be addressed. Moreover, financial crashes may be the analogue of criticality in statistical systems, which implies a property known as "scale invariance". This in turn gives power law and, more interestingly, log-periodic modulations in systems. We have identified such oscillations in stock indices over very different time scales (days, months, years). This observation seems indeed to have predictive power.