The impact of P/E ratio and price return on the stock market Bohmian quantum potential approach

Document Type : Original Article

Authors

1 Department of Accounting, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

2 Department of Business Management, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran.

3 Department of Marine Sciences, Faculty of Natural Resources and Environment, Science and Research Branch, Islamic Azad University, Tehran, Iran

4 Department of Financial Management, Science and Research Branch, Islamic Azad University, Tehran, Iran

Abstract

Price return and P/E are two important factors for a lot of investors based on the latest studies by researchers in Tehran Stock market; however, it is expected that the price and the variation of that affect the return and the P/E of any given market as a complicated system. The Bohmian quantum mechanics used referring to the time correlation of return and P/E of the stock market under consideration. In this study, we extend the quantum potential concept to determine the behavior of P/E and also price return. The obtained results show that the quantum potential behaves in the same manner for P/E and price return, also confines the variations of the P/E and price return into a specific domain. Furthermore, a joint quantum potential as a function of return and P/E is derived by the probability distribution function (PDF) constructed by the real data of a given market. It serves as a suitable instrument to investigate the relationship between these variables. The resultant PDF and the corresponding joint quantum potential illustrate that where we have light points in joint quantum potential chart, the probability of those amount of P/E and price return are more than other point.

Keywords

References

1) Baaquie, B.E. (2013). Statistical microeconomics, Physica A, 392(19), 4400–4416, http://dx.doi.org/10.1016/j.physa.2013.05.008.
2) Baaquie, B.E., Du, X., Bhanap, J. (2014). Option Pricing: Stock Price Stock Velocity and the acceleration lagrangian, Physica A, 416(23), 564-581, http://Dx.Doi.Org/10.1016/J.Physa 09.019.
3) Black, F., Scholes, M. (1973). The Pricing of Options and Corporate Liabilities, Journal of Political Economy, 81(3), 637–654, http://dx.doi.org/10.1086/260062.
4) Campbell, J.Y., Grossman, S.J., Wang, J. (1993). Trading volume and serial correlation in stock returns, Quarterly Journal of Economics, 108(4), 905–939, http://dx.doi.org/10. 2307/2118454.
5) Chakraborti, A., Muni Toke, I., Patriarca, M., Abergel, F. (2009). Econophysics: Empirical facts and agent-based models ArXiv e-prints, 11(2), 1013-1041.
6) Chakraborti A., Muni Toke, I., Patriarca, M., Abergel, F. (2011). Econophysics review: II. agent-based models, Quantum Finance, 11(5),
1013–1041, http://dx.doi.org/10.1080/14697688.2010.539249.
7) Chen, J. (2014). The Unity of Science and Economics: A New Foundation of Economic Theory. SSRN Electronic Journal, 25(7), 1050-1092, http://dx.doi.org/10.2139/ssrn.2516607.
8) Choustova, O. (2008). Quantum model for the price dynamics: The problem of smoothness of trajectories, Journal of mathematical analysis and applications, 346(12), 296–304, http: //dx.doi.org/10.1016/j.jmaa.2008.04.072.
9) Choustova, O. (2004). Bohmian mechanics for financial processes, Journal of Modern Optics, 51(22), (6–17), https://doi.org/10.1080/09500340408233645.
10) Choustova, O. (2009). Quantum probability and financial market, Information Sciences, 179(5), 478–484, https://doi.org/10.1016/j.ins.2008.07.001.
11) Choustova, O. A. (2002). Pilot wave quantum model for the stock market. In Quantum Theory: Reconsideration of Foundations, Journal of Mathematical Modeling, 52(2), 53–66, http://www.arxiv.org/abs/quant-ph/0109122.
12) Chen, J. (2015). The Unity of Science and Economics: A New Foundation of Economic Theory, first ed., Springer-Verlag, New York, http://dx.doi.org/10. 1007/978-1-4939-3466-9.
13) Dayag, a.J., Trinidad, F. (2019). Assesment the correlatiom between price return ratio and price return in Philippines, research in business and social science, 122(85), 144-154.
14) Habib, N.M. (2011). Trade volume and returns in emerging stock markets an empirical study: The Egyptian market, international journal humanities social science, 55(12), 302–312, http://www.ijhssnet.com/journals/Vol_1_No_19_December_2011/32.pdf.
15) Khrennikov, A. (1999). Classical and quantum mechanics on information spaces with applications to cognitive, psychological, social, and anomalous phenomena, 55( 29), 1065–1098, http://dx.doi.org/10.1023/A:101888563.
16) Lo, A.W., Wang, J. (2000). Trading volume: Definitions, data analysis, and implications of portfolio theory, The review of financial studies, 13(5), 257–300, http://dx.doi.org/10.1093/rfs/13.2.257.17) Lee Reimond, S. T. (2019). Quantum finance, Division of science and technology, Beijing normal university united international college, Zhuhai, Guangdong, China 56-78.
18) Mantegna, R.N., Stanley, H.E. (2000). Introduction to Econophysics: Correlations and Complexity in Finance, Cambridge University Press, Cambridge Piotrowski E.W., J.
19) Nasiri, S., Bektas, E., Jafari, G.R. (2018). Risk Information of Stock Market Using Quantum Potential Constraints, In: 3rd International Conference On Banking And Finance Perspectives, https://Icbfp2018.Emu.Edu.Tr/En.
20) Ohwadua, O., Emmanuel, O., Ogunfiditimi, F.O. (2018). A Quantum Finance Model for Technical Analysis in the Stock Market, International Journal of Engineering Inventions, 7(2), 07-12.
21) Shen, C., Haven, E. (2017). Using Empirical Data to Estimate Potential Functions in Commodity Markets: Some Initial Results. International Journal of Theoretical Physics, 56(12), 4092–4104, https://doi.org/10.1007/s10773-017-3446-z.
22) Todorova, N., Soucek, M. (2014). The impact of trading volume, number of trades and overnight returns on forecasting the daily realized range, Economic Modelling, 36(11), 332–334, http://dx.doi.org/10.1016/j.econmod.2013.10.003.
23) Tahmasebi, F., Meskinimood, S. A., Farahani, S.V., Jalalzadeh, S., Jafari, G.R. (2015). Financial market images: A practical approach owing to the secret quantum potential, Europhysics Letters, 109(3), 30001, http://dx.doi.org/10.1209/0295-5075/109/30001.
24) Ward, D., Volkmer, S. (2019). how to Derive the Schrodinger Equation [online] arXiv.org, Available on the internet at: https://arxiv.org/abs/physics/0610121v1.
International Journal of Finance & Managerial Accounting
Volume 5, Issue 18
September 2020
Pages 55-62

Files

Share

How to cite

Statistics