Rogue Waves, Econophysics and Quantum Mechanics

Tales of monster freakish waves in world oceans were often told by seamen who witnessed them.  Amazingly, it was just a little over ten years ago that these "monster waves" were finally confirmed by scientists via measurements at the Draupner oil platform in the North Sea.  Scientists had previously tried to model these waves prior to the Draupner wave:

Anecdotal evidence is often unreliable, so researchers used computer modelling to predict the likelihood of such massive waves. Oceanographers' findings indicated that waves higher than fifteen meters were probably very rare events, occurring perhaps once in 10,000 years.

It turns out these waves are visible from satellites (image at left courtesy ESA) and were found to be far more common than the classical linear modeling showed.  I've actually run these classical computations.  It's now believed these waves can reach an incredible 198 feet in height.  Scientists still don't know the cause of the waves, but it appears that the freak ones are some kind of non-linear combination of waves and can be approximated by the Schrodinger wave equation from quantum mechanics.

I wondered if anyone had tried to apply the Schrodinger equation to model the tech bubble or the market in general.  A search of econophysics turns up the growing subfield of "quantum econophysics" where it is applied to game theory problems such as the classic Prisoner's Dilemma problem that Complex Adaptive Systems are often applied to, but no sign of the Schrodinger Equation. 

I'm not sure the Schrodinger Equation would lead to profits in the market, but the similarities with it's application to describing ocean waves are hard not to notice:

Nonlinear combination of water waves and currents combine to cause freakish events that are more common than anticipated (demographic, investor euphoria, Y2K spending and day trading waves combine to cause freakish events thought to be rare by classical lognormal stock return theory).

Comments

[Caravaggio]

An excellent insight. Thanks.

[jp]

Didier Sornette have a book on stock markets crash. He model the market bubbles

[Alan J]

Thanks, Caravaggio. jp: Sornette is a geophysicist, like me (earlier in life), so I was fascinated by his work. He even tried online prediction of the market for awhile:

http://www.ess.ucla.edu/faculty/sornette/prediction/index.asp