Elliott waves and Landau damping on the stability of asset pricing

What is it about?

The complex dynamics of the stock market and asset prices can be analyzed by considering the exchanged shares as fluctuating and the unexchanged shares as nonfluctuating entities. The traders exhibit a kind of group oscillations that resemble the waves in physical plasma. At steady state, the waves can be expressed by a cosine term, and at the least stable state, the dynamics involves the golden ratio, such that the cosine of 36
degree is equal to half of the golden ratio. Using the trigonometric cosine formula, it is possible to obtain other angles which are the multiples of 9
degree. They can be expressed in terms of the golden ratio, and they stand as Fibonacci angles. The stabilization is achieved by a mechanism so-called Landau damping, and the waves thus created are called Elliott waves, and they keep the system near the instability border.

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Why is it important?

So far there hasn't been any established concrete physical ground to answer the question of why Elliott waves exist. The aim of this paper is to address this question. The creation of the waves in financial systems and the stability and instability issues of stock markets and asset prices were manifested in terms of Landau damping and the Elliott waves.

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