Stock Market & Human Brain Connection: Myth or Reality

In a number of ways, stock market behaviour and human brain dynamics show remarkably similar behaviour. In this analogy, the companies play the role of neurons of the human brain. We explore this connection quantitatively, through a variety of mathematical tools, for studying the nature of fluctuations in both of these systems and establish their role in correlating intra and inter sector dynamics. It is found that, both non-stationary high frequency fluctuations and low-frequency stable modes play vital role in the synchronization process. The wide difference in their scales enables us to effectively use “Wavelet transform” for disentangling their modulations and highlight their role. The collective stable modes and their ‘noise’ counterparts were characterized through the Random matrix approach, which enabled us to unravel the temporal evolution of the synchronization dynamics, through a correlation based ‘Network’. The stock market crisis of 2008 provided us the perfect opportunity for corroborating these findings.