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Related Concept Videos

Regression Toward the Mean01:52

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Regression toward the mean (“RTM”) is a phenomenon in which extremely high or low values—for example, and individual’s blood pressure at a particular moment—appear closer to a group’s average upon remeasuring. Although this statistical peculiarity is the result of random error and chance, it has been problematic across various medical, scientific, financial and psychological applications. In particular, RTM, if not taken into account, can interfere when researchers try to extrapolate results...
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Updated: Jun 5, 2026

A Psychophysics Paradigm for the Collection and Analysis of Similarity Judgments
08:12

A Psychophysics Paradigm for the Collection and Analysis of Similarity Judgments

Published on: March 1, 2022

Relativistic statistical arbitrage.

A D Wissner-Gross1, C E Freer

  • 1The MIT Media Laboratory, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139, USA. alexwg@post.harvard.edu

Physical Review. E, Statistical, Nonlinear, and Soft Matter Physics
|January 15, 2011
PubMed
Summary
This summary is machine-generated.

Optimal locations for high-frequency trading arbitrage exist, leveraging light speed delays. Coordinating trades between spacelike separated securities can effectively halt the propagation of tradable information.

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Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
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Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods

Published on: September 19, 2012

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Last Updated: Jun 5, 2026

A Psychophysics Paradigm for the Collection and Analysis of Similarity Judgments
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Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
13:04

Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods

Published on: September 19, 2012

Area of Science:

  • Econophysics
  • Financial Mathematics
  • Relativity

Background:

  • High-frequency trading (HFT) necessitates considering light propagation delays.
  • Geographically dispersed financial markets introduce relativistic effects.
  • Statistical arbitrage relies on exploiting price discrepancies.

Purpose of the Study:

  • Identify optimal locations for coordinating statistical arbitrage.
  • Map these optimal locations globally.
  • Investigate the impact of arbitrage on information propagation speed.

Main Methods:

  • Analysis of light propagation times between financial exchanges.
  • Calculation of optimal intermediate trading locations.
  • Modeling of information flow in a chain of arbitrageurs.

Main Results:

  • Existence of specific optimal locations for arbitrage coordination.
  • A global map illustrating these key locations.
  • Demonstration of an "econophysical" effect where arbitrage slows information speed.

Conclusions:

  • Relativistic effects are significant in modern financial trading.
  • Optimal arbitrage strategies can manipulate information propagation.
  • This research opens new avenues in econophysics and HFT.