Financial market images: A practical approach owing to the secret quantum potential

Abstract

We unveil secrets of the financial markets that prove very effective on shaping their future. The question to be answered is why instant high amplitude variations of price returns are never experienced. We deduce that the key to shedding light on this issue is the quantum potential whose existence is due to the entanglement between a price and its prior-day price. Implementing the quantum potential would enable us to sketch a robust pattern for the price return fluctuations of a financial market. As such, we model real markets by the Bohmian quantum approach bearing a quantum potential that guides the price return fluctuations. Strictly speaking, we show that this quantum potential confines the price returns of real markets in a scale-invariant manner, which proves to be different for emerging and efficient markets. By modelling the oil and gold markets we see that a 20 day time scale is enough to exhibit the class difference of the scaling behaviour. The appearance of this characteristic time scale lies in the fact that oil and gold markets are influenced by short- and long-term programs. This statement is supported by the fact that short-term programs are due to the market supply and demand, while long-term programs are due to political and natural factors. In short times the potential is very efficiently controlling the market showing a big margin against a white noise, while in the long run the potential is not as efficient as before tending to look more like a white noise. This is due to the widening of the boundaries disabling the quantum potential efficiency on controlling the market, and hence justifying the model.