We present the data on wealth and income distributions in the United Kingdom, as well as on the income distributions for the individual states of the USA. In all of these data, we find that the great majority of population is described by an exponential distribution, whereas the high-end tail follows a power law.
We study the Heston model, where the stock price dynamics is governed by a geometrical (multiplicative) Brownian motion with stochastic variance. We solve the corresponding Fokker–Planck equation exactly and, after integrating out the variance, find an analytic formula for the time-dependent probability distribution of stock price changes (returns). The… (More)
This Colloquium reviews statistical models for money, wealth, and income distributions developed in the econophysics literature since the late 1990s. By analogy with the Boltzmann-Gibbs distribution of energy in physics, it is shown that the probability distribution of money is exponential for certain classes of models with interacting economic agents.… (More)
We study the probability distribution of stock returns at mesoscopic time lags (return horizons) ranging from about an hour to about a month. While at shorter microscopic time lags the distribution has power-law tails, for mesoscopic times the bulk of the distribution (more than 99% of the probability) follows an exponential law. The slope of the… (More)
Outline • Boltzmann-Gibbs distribution in physics • Probability distribution of money (theory) • The roles of debt and time-reversal symmetry • Probability distributions of income and wealth (data)
This dissertation reports work where physics methods are applied to financial and economical problems. Some material in this thesis is based on 3 published papers [1, 2, 3] which divide this study into two parts. The first part studies stock market data (chapter 1 to 5). The second part is devoted to personal income in the USA (chapter 6). We first study… (More)
The terms highlighted in bold in Sec. I refer to other articles in this Encyclopedia. This paper reviews statistical models for money, wealth, and income distributions developed in the econophysics literature since late 1990s.
– Personal income distribution in the USA has a well-defined two-class structure. The majority of population (97–99%) belongs to the lower class characterized by the exponential Boltzmann-Gibbs (" thermal ") distribution, whereas the upper class (1–3% of population) has a Pareto power-law (" superthermal ") distribution. By analyzing income data for… (More)
In this short paper, we overview and extend the results of our papers [1, 2, 3], where we use an analogy with statistical physics to describe probability distributions of money, income, and wealth in society. By making a detailed quantitative comparison with the available statistical data, we show that these distributions are described by simple exponential… (More)
Using tax and census data, we demonstrate that the distribution of individual income in the USA is exponential. Our calculated Lorenz curve without fitting parameters and Gini coefficient 1/2 agree well with the data. From the individual income distribution, we derive the distribution function of income for families with two earners and show that it also… (More)