Quantum Two-Level Oscillation Model of Bull–Bear Market Regimes
By Medhansh
This project investigates whether a simple quantum two-level system can provide an informative alternative to classical models of bull–bear regimes in financial markets. Standard regime-switching models treat the market as occupying one of two states, bull or bear, with fixed transition prob- abilities estimated from historical return data. Here, we instead model the market as an effective quantum two-state system with basis states Bull and Bear that evolve under a Hamiltonian gen- erating Rabi-like oscillations, supplemented by a tunable decoherence process that damps purely coherent behavior. Using daily price data from broad market indices, we will label returns as bull or bear using a transparent threshold rule, fit a classical two-state Markov chain as a baseline, and then construct and fit a quantum two-level model whose parameters are chosen to match empirical one-day and multi-day transition statistics.