Quantum Harmonic Oscillator Model of Stock Return Distributions
By Harry
Stochastic models have been used for decades to model stock prices. Recently, the advancement of quantum mechanics has led to novel research in using quantum models to model stock prices. This paper leverages the quantum harmonic oscillator to model the long term log stock return distributions of stock prices, which can be used for forecasting stock markets. A wave function represented by the square of the superposition of the eigenfunctions of the quantum harmonic oscillator is used to model past stock returns. A phase factor is applied to the wave function to predict future stock return distributions of that stock.