Econophysics, a good career path?

[VktGS]

I'm in my junior year of college of a major in physics, and I'm already considering my job oportunities. In a country like mine (i live in Colombia, by the way) is kind of hard to get a job as a researcher if you don't want to be a professor (my case) and the global landscape doesn't seem very promising either. So, i was wondering if you could recommend me some articles or books on econophysics. I just want to see what is it about, because, as a career path it seems better from a global perspective. Also, if any of you have worked in this field i'd appreciate if you share some of your experiences with me.

Thanks in advance

 

[Raioneru]

if you want to pursue a career in econophysics, it means you're most likely interested by a career in finance.
you might want to look at opportunities to pursue a graduate degree in quantitative finance, financial maths, financial engineering.

if you want to the road of physics, you need to seriously consider going into research and also becoming a professor because these are the advantages one PhD student has over those with Msc degrees.
However from what I hear, you have good chances of getting a quantitative analyst/researcher/associate position with a PhD in Physics (imo I would make sure that what is taught in the PhD program is easily transferred to the finance world, maybe complex systems, non linear dynamics/physics etc . . .)

there is an interdisciplinary program in physics that deals with econophysics at the university of fribourg in swizertland,
I think the founder of the hedge fund capital fund management supervises PhD students in Paris france for polytechnique and Paris VI.
there is also a program at the university of houston in econophysics.
if you get in touch with these people they should be able to give you an idea about the field.

hope that helps

 

[twofish-quant]

there is an interdisciplinary program in physics that deals with econophysics at the university of fribourg in swizertland,

Once should point out that the mathematical methods that are associated with "econophysics" are hardly ever used in finance and probably won't help you get a job. If you are interested in working in quantitative finance with a physics focus, you are better off getting a straight Ph.D. in computational astrophysics and solid state.

 

[bilburns]

Google.video.uk ` Bits and Codes.` Lecture 2 MIT 6.050J Information and Entropy. Professor Seth Lloyd. The really interesting bit showing that gravitation in cosmological systems and debt in economic systems are one and the same and that an economic collapse may be understood in terms of theoretical physics comes at c. 55:00.

 

[Raioneru]

LOL can we pin this up? No? OK nevermind ^_^

Anyone interested in econophysics should look for complex systems programs. it's also a smart move because complex systems prepares students to work in field such as biology, sociology and of course Quant-finance/economics.

found a couple places where one can study for a Msc and/or PhD in complex systems or econophysics:

http://www.er.ethz.ch/
Zurich, Switzerland where Pr. Didier Sornette is established.
I don't think they offer a Msc/PhD degree in econophysics per se however you can do your Msc in physics (or mathematical Finance, and any related fields) and then do your Msc Thesis (as you can see there are at this moment 26 projects available) in their group, and possibly your PhD too. Google Didier Sornette, his talks, presentations etc . . .

http://ifisc.uib-csic.es/master/
Palma de Mallorca, Spain - yes, right next to Ibiza for those care
They do specialize in biology, however the head of the research center told me one of their recent student did his PhD thesis on game theory and left to work for a bank in zurich. The content of their Msc degree looks quite appealing, takes 1 yr to complete, and did I mention the beach?! jk

http://www.kcl.ac.uk/prospectus/graduate/complex-systems-modelling
http://www.kcl.ac.uk/prospectus/research/mathematics
King College London has a Msc in complex systems, and I have found that couple of their Maths Professors/researchers actually do research in econophysics inside their Financial maths group. At KCL, Theoretical physics (not what you want to study . . .) belongs to the mathematics department and not the physics dpt.

http://theory.physics.manchester.ac.uk/~galla/cssp/pg.html
The University of Manchester offers a Msc in theoretical Physics by research (1/3 coursework, 2/3 research projects !) and a PhD in complex systems and statistical physics. Based on the research projects available at UoM I think it's one of the most interesting place to go (even more so if you're a mufc fan )

http://www2.warwick.ac.uk/fac/cross_fac/complexity/
Msc and phD in Complex systems, from what I understand it's a Multi-university programs, where students spend 1yr at warwick and a year at another university in Europe.

http://www.wbs.ac.uk/about/person/tobias-preis/ (Finance PhD)
Tobias Preis works in the finance department (Behavioral Finance section) where his econophysics research is focused on financial markets. I'm not sure if he does "hang out" with the complex systems guys but for those interested Warwick Finance PhD is worth a look too. Google Tobias Preis and watch his talks and presentations.

http://physics.bu.edu/people/show/hes (PhD, do Physics Msc have any value in the US? )
Eugene Stanley (Boston University) has written a book on econophysics: https://www.amazon.com/dp/0521039878/?tag=pfamazon01-20
Have a look at the video of a talk he gave in italy about economics: (he can be one funny old bloke )

http://www.phys.uh.edu/research/econophysics/program/index.php (PhD)
University of Houston Physics Program which I think is known by a couple of people on this forum.

http://www.theo-phys.uni-essen.de/tp/ags/guhr_dir/econophysics.php?lang=en (PhD)
Dr. Rudi Schäfer heads the econophysics group of University of Duisburg-Essen in Germany.
Best for PhD only since the working language is english at the doctorate level, and german at the Msc Level.

http://www.itp.uni-bremen.de/complex/ (PhD)
Based in Bremen, germany. Same with Uni-essen, Working language is english at the doctorate level only.

http://web.physics.ucsb.edu/~complex/research/econophysics.html
Back to the US with UC Santa Barbara.

http://www.physics.ucdavis.edu/people/faculty/faculty_profiles/john_rundle.html (PhD)
at UC Davis, Pr john Rundle works in the complex systems section. More precisely on "econoquakes" (get it?)

http://igk.math.uni-bielefeld.de/
Interdisciplinary programs which focuses on theory and application of multiple fields such as finance/economics/mathematics/physics

http://physics.unifr.ch/en/page/105/
home to the econophysics forum (not very active . . .)
I believe both Msc and PhD working language is English.


That's it. please note, I don't have all the info so if someone wants to find out more they will have to look up these programs. Also I took the liverty of not including a couple of other programs since they are not in english (french, since this is my first language) and I'm sure there are other programs in european countries but since they're not in english I didn't bother look them up. Feel free to ask questions, I will answer if I can. :D

 

[Raioneru]

http://economictimes.indiatimes.com...ancial-bubble-bursts/articleshow/21540512.cms

By Anand Tandon

Chances are you have never heard of Didier Sornette. Chances are that the next time you hear of him, you will be significantly poorer — unless you listen to what he says now.

Sornette is the professor of entrepreneurial risks at the Swiss Federal Institute of Technology (ETH Zurich). His research focuses of the prediction of crisis and extreme events in complex systems. His work covers earthquake physics, dynamics of success on social networks and complex system approach to medicine. However, the part that attracts market attention is what he does at the Financial Crisis Observatory, which is to test the hypothesis that financial "bubbles" can be diagnosed in real time and their termination predicted probabilistically.

In other words, he attempts to find when the next big fall in the financial markets can occur.

The term "bubble" refers to a situation where excessive future expectations lead to rise in prices. Sornette identifies speculative bubbles as arising from a confluence of two factors — factors that drive initial demand — say, new technology or perception of reduced market risk. This is followed by "amplification mechanisms", where a large increase in asset price is followed by higher demand as investors think that further increases in price will follow. This "super-exponential" acceleration in prices due to a positive feedback (or "pro-cyclicality") leads to formation and then maturation of a bubble in finite time.

In other words, when expectations of growth rate itself grow, it leads to instability. Recent examples have been the crash of 2008 and the technology burst in 2000, among others. In Sornette's world, the cause of the crash is unimportant. His research suggests that crashes have an internal origin — the unrealistic rise in expectations — and external factors only serve as catalyst for the subsequent burst. So why is all this important?

Of Black Swans...

In 2001, Nassim Nicholas Taleb, quantitative trader and academician, published a book Fooled by Randomness where he outlined the theory of Black Swans. Taleb described black swans as events whose probability of occurrence was mathematically very low (like finding a black swan in a bevy of white swans). Taleb explained that these events occur with higher frequency than theory predicted, were hard to predict if not impossible to predict, and caused events of significant consequence and magnitude.

... and Dragon Kings

Sornette, on the other hand, makes an entirely contrary claim. Not only can he predict the probability of a bubble bursting, he can do it with remarkable accuracy and, of course, before the event! He calls these outlier events as Dragon Kings. He has graphs that show the predictions of the S&P 500 US Index, and oil prices — made before the crash in 2007-08. These and others can be found on the website of his Financial Crisis Observatory.

A Matter of Modelling

The broad basis of the prediction is based on "power law". Most models of market prices use the "normal" distribution to model price behaviour. This model underestimates risk. Studies suggest that a better model, especially when markets are leveraged — which they often are — is to apply the power law.

Sornette's model looks for "outof-control" growth in asset prices that vary from the power law. "When herding behaviour among investors ramps up, a stock's or index's growth rate can increase faster than exponentially, leading to more herding. This positive feedback brings the system to a tipping point. About two-thirds of the time, a crash results," says Sornette in a paper in 2009.

To break away from allegations that his forecasts are self-fulfilling — after all, market participants who believe his forecasts are likely to start positioning themselves accordingly, Sornette's team now makes forecast that are released in encrypted form on a website with a public key to decode the paper after the forecast period. His most recent prediction was a "Sell" signal on May 21 on the S&P 500, when his Crash Risk Index jumped up. The market was down 9.5% in a month after that.

Sornette recently made a presentation at TED Global 2013 — a talk worth viewing. The upshot of the presentation and the subsequent interview is that he continues to foresee bubbles in financial and insurance sectors, as well as construction and realty sectors in the US — the very same sectors that led the burst in 2008 in the first place.

Ironically, the success of a model can also lead to its demise as participants adjust their behaviour to include the forecasts of the model. Till this happens, Sornette's research needs to be taken seriously.

(The writer is CEO of a financial firm.)