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Entropy
Volume 25
Issue 4
10.3390/e25040557
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Article

Noise and Financial Stylized Facts: A Stick Balancing Approach

by
Alessio Emanuele Biondo
1,
Laura Mazzarino
2 and
Alessandro Pluchino
3,*
1
Department of Economics and Business, University of Catania, 95129 Catania, Italy
2
Department of Physics and Astronomy, University of Catania, 95123 Catania, Italy
3
Department of Physics and Astronomy, University of Catania and INFN-Section of Catania, 95123 Catania, Italy
*
Author to whom correspondence should be addressed.
Entropy 2023, 25(4), 557; https://doi.org/10.3390/e25040557
Submission received: 29 January 2023 / Revised: 13 March 2023 / Accepted: 22 March 2023 / Published: 24 March 2023
(This article belongs to the Special Issue Beneficial Role of Noise in Complex Systems: From Quantum Level to Socio-Economic Systems)
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Abstract

In this work, we address the beneficial role of noise in two different contexts, the human brain and financial markets. In particular, the similitude between the ability of financial markets to maintain in equilibrium asset prices is compared with the ability of the human nervous system to balance a stick on a fingertip. Numerical simulations of the human stick balancing phenomenon show that after the introduction of a small quantity of noise and a proper calibration of the main control parameters, intermittent changes in the angular velocity of the stick are able to reproduce the most basilar stylized facts involving price returns in financial markets. These results could also shed light on the relevance of the idea of the “planetary nervous system”, already introduced elsewhere, in the financial context.
Keywords: beneficial role of noise; human stick balancing; financial markets; planetary nervous system beneficial role of noise; human stick balancing; financial markets; planetary nervous system

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MDPI and ACS Style

Biondo, A.E.; Mazzarino, L.; Pluchino, A. Noise and Financial Stylized Facts: A Stick Balancing Approach. Entropy 2023, 25, 557. https://doi.org/10.3390/e25040557

AMA Style

Biondo AE, Mazzarino L, Pluchino A. Noise and Financial Stylized Facts: A Stick Balancing Approach. Entropy. 2023; 25(4):557. https://doi.org/10.3390/e25040557

Chicago/Turabian Style

Biondo, Alessio Emanuele, Laura Mazzarino, and Alessandro Pluchino. 2023. "Noise and Financial Stylized Facts: A Stick Balancing Approach" Entropy 25, no. 4: 557. https://doi.org/10.3390/e25040557

APA Style

Biondo, A. E., Mazzarino, L., & Pluchino, A. (2023). Noise and Financial Stylized Facts: A Stick Balancing Approach. Entropy, 25(4), 557. https://doi.org/10.3390/e25040557

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