Econophysics from Theory to Application: a Case Study of Iran

Mahdi Shahrazi; Saeed Rasekhi
Econophysics is a rapidly growing field which applies the idea of physics especially statistical physics into economics especially financial economics. This paper first reviews the history, concepts, applications, and challenges of econophysics and then ends with an empirical investigation. Based on present paper, economists were who firstly introduced interaction between economics and physics (that we call it old econophysics), but the majority of the efforts in new Econophysics is made by physicists and the role of economists is small in this case. Physicists are not always aware of the true nature of economic theories and sometimes introduce models without any real economic theory at all. The greater degree of collaboration between economists and physicists can promote the analytical content of econophysics and improve the average quality of scientific endeavor in this newly established field. As an application of economphysic, we’ve applied detrended fluctuation analysis (DFA) to Iranian foreign exchange market. By employing Iranian Rial/US Dollar daily Forex exchange rate data from 14:03:2009 to 18:04:2010, our results suggest the exchange rate time series has long memory implying that it should be possible for speculators to extract risk-free profits by studying past Rial/Dollar series.
Econophysics; Statistical Physics; Financial Economics; Detrended Fluctuation Analysis; Scaling Theory, Random Walk; Long Memory; Forex Market; Iran
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