How quantum mechanics explains stock market ?
I am sure, you know about Mr. Albert Einstein.
You may or may not be interested about physics, but I am sure you heard his name.
He was probably the most celebrated scientist of last century.
In the year 1905, at the age of 26 he wrote 4 papers.
It was a miraculous feat to write four of the most ground breaking papers in a row.
The topics are below -
#1 Photo-electric Effect ( Concept of light quanta )
#2 Brownian Motion ( Motion of small particles in stationary liquid )
#3 Special Relativity ( The theory which actually made him a household name )
#4 Mass-Energy Equivalence / E = mc2
Each of these individual papers are so fundamental & instrumental in nature that any one of them was enough to fetch him a Nobel prize.
A 26 year old young man, writing 4 immortal papers in a single year, probably this never happened in the history of physics.
I feel there are some funny similarities between what Mr. Einstein proposed in these papers and how stock market behaves !
For example, let’s focus on the first paper published by Mr. Einstein. The paper was on photo electric effect.
The photo electric effect paper introduced a new concept on — how electro magnetic waves are absorbed & emitted.
Einstein deduced a model where the light wave is radiated in small packets ( energy quanta ) rather than continuous distribution.
As per this new model, light is not distributed in space in a continuous form rather it comes in discreate packets !
This idea is different than what we used to thought about any electro magnetic radiation. Isn’t it ?
Now, what about Equity Market ?
How many times in your life you bought a stock and then experienced that nothing is happening in the stock price. Absolutely nothing.
The stock price is going nowhere. It is going up 1–2% and then coming down 1–2%.
And then in a fine morning you saw it is up 15%.
Please understand, this is absolutely normal in equity market.
Returns in equity market comes into sudden packets and they are not continuous distribution over a time.
It works exactly like photo-electric effect that Mr. Albert Einstein explained.
Isn’t it fascinating ?
Next time if you are convinced about a company but if it’s stock price is not moving, you know whom you should remember :)
It’s Mr. Albert Einstein !
P.S. — I personally feel investing is not a stereo type subject which you can mug up & deliver. Investing is a multi-disciplinary subject where understanding of History, Physics, Chemistry, Civilization, Biology, Medicine, Literature and everything else comes into play and can give you different angle of thought.
Reading & connecting dots between several subjects can make things interesting and I personally like it.
What do you think ? Hit reply & let me know your thoughts.
