Econophysics with Jean-Philippe Bouchaud
Jean-Philippe Bouchaud, a statistical physicist, is a pioneer in econophysics, a research field applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynamics. He is the co-founder and chairman of Capital Fund Management, global asset management using quantitative and scientific approaches to financial markets to invest billions of dollars in a systematic way. He is also the Head of Research of CFM and a professor at École Normale Supérieure.
We talk about how ideas in dynamical systems theory and complex systems theory, like the ones developed by the 2021 Physics Nobel prize Giorgio Parisi, but also by Michael Fisher and Benoit Mandelbrot, influenced him. We talk about fat tails, Levy flights, and their emergence in both physical and financial systems. We talk about diffusion phenomena, fractional Brownian motion, hyperchaos, the Hurst exponent, and their application in finance. We touch on the wisdom of crowds, the emergence of intelligence in complex systems, their relations with the efficient market hypothesis, and the limits of Markovian modeling of the financial market.
We also try to inform policymaking, both aiming at an optimal level of inequality in society and dealing with systematic incentives to push against what Bret Weinstein calls the personal responsibility vortex, therefore criticizing the invisible hand idea by Adam Smith. We close with the use of Artificial Intelligence techniques in finance, focusing on the relationship between Deep Learning, Kernel Methods, and Random Matrix Theory.