When Physics Meets Finance: A New Way of Seeing Markets
We’re told that markets are random. Traders rely on charts, quants rely on statistics, and most people assume prices move with no real structure. But physics teaches us something else: behind what looks like chaos, waves often drive order.
In the physical world, waves don’t just ripple. They collide, interfere, and resonate. Sometimes they cancel each other. Sometimes they amplify. And when the interference reaches a threshold, the wave “collapses” — a photon appears, a tide shifts, a particle chooses a path.
Markets do behave the same way.
That’s the premise behind my work with the Total Wave Modified Schrödinger Equation (TWMSE). It’s a model born in quantum physics but tested here on finance. Instead of seeing markets as random ticks, it treats them as waves. Price action becomes a field — and what we see as “the price” is just the collapse of interfering waves of momentum, sentiment, and liquidity.
To test this, we built what we call a Quantum Score, combining measures like momentum curvature, phase alignment, volatility coupling, and attention indices. We then applied it to a dataset of 30 major U.S. equities.
The results were eye-opening:
26 out of 30 stocks showed positive out-of-sample Sharpe ratios
The median Sharpe was 4.78, far above random baseline
The average hit rate was 71%
We stress-tested it with all the usual quantitative tools — deflated Sharpe analysis, cross-validation, White’s Reality Check, and even randomized phase controls. The signal held.
Of course, this doesn’t mean the work is finished. Markets are living systems, shaped by human behavior and information flows. What this shows, though, is that finance may not be separate from physics. It may simply be another place where waves collide and collapse into reality.
That’s why I’m sharing this research openly:
📄 SSRN link (coming soon)
Because in the end, finance isn’t just about money. It’s about how waves — in nature, in people, in markets — come together and collapse into the reality we live in.