Econophysics and Physical Economics
Peter Richmond,，Jurgen Mimkes，Stefan Hutzler
Financial assets are vital parts of the global economy, and an understanding of the origin and nature of price movements is crucial to management of risk. The sums of money involved can be measured in trillions of euros, dollars, or yen—choose any currency you wish, the figures are huge. Time investments correctly and it is possible to make millions of dollars. Robert Merton of Harvard has pointed out that a dollar invested in 1926 in US Treasury bills would have become 14 dollars by 1996. The same dollar invested in the S&P index would have grown to 1,370 dollars. However if perfect timing each month had been possible and the money switched between these two investment routes the total by 1996 would have become 2,296,183,456 dollars! Undoubtedly, and despite the ongoing financial crisis, the total in 2012 would have become at least ten times this value, as may be estimated by considering only the main three peaks and troughs in the index since 1996. Really clever people might have achieved much more by riding the smaller waves within the booms and crashes!