Phase Transitions, Renormalization and Yang-Lee Zeros in Stock Markets

Abstract

The present paper analyses the formal parallelism existing between the laws of thermodynamics and some economic principles. Based on previous works, we shall show how the existence in Economics of principles analogous to those in thermodynamics involves the occurrence of economic events that remind of well-known phenomenological thermodynamic paradigms (i.e., the magnetocaloric effect and population inversion). We shall also show how the phase transition and renormalization theory provides a natural framework to understand and predict trend changes in stock markets. Finally, current negotiation strategies in financial markets are briefly reviewed.